October 31, 2012
Study: Middle Market PE Buyer/Public Target M&A Deals
Recently, Schulte Roth released a “Middle Market PE Buyer/Public Target M&A Deal Study” that identifies “market practice” involving private equity buyer acquisitions of U.S. public companies specifically in the middle market for the period from January 2010 to June 30, 2012.
Key observations in the middle market include:
1. Activity in the middle market is down year over year
2. While fewer deals are getting done, it is taking targets less time to get to signing
3. The usage of pre-signing market checks rose in 1H 2012 as compared to 2011, but so did the use of “go-shop” provisions
4. Since 2010, market practice has changed dramatically on two issues — the target’s right to obtain specific performance to force a buyer to close and use of reverse termination fee (“RTF”)
Key observations: middle market vs. large market:
1. In general, market practice is consistent across middle market and large market deals — with a few notable exceptions
2. In 1H 2012, middle market deals were signed up much faster than large market deals
3. “Go-shop” provisions were used less frequently in middle market deals — in particular, where the tar¬get did not conduct a pre-signing market check
4. While RTFs in middle market deals were high¬er than large market deals in 2010, they have since fallen below those of large market deals