DealLawyers.com Blog

November 4, 2009

Study: Selected U.S. Strategic M&A Transactions

From Paul Weiss: Here is our recent survey of selected U.S. strategic mergers announced during the period from August 1, 2007 to July 31, 2009. The M&A marketplace during the past few years can be characterized by superlatives on both ends of the spectrum, from the heights of 2007 featuring headlines such as “$100 Billion Merger Monday” (The Wall Street Journal, April 23, 2007) to the depths of 2008 when total global M&A volume had fallen by half from 2007, including these characteristics:

– Certainty was paramount. Among many of the transactions surveyed as deal makers sought to define their respective rights and obligations as specifically as possible in the face of various contingencies. The effort to achieve certainty can be seen in, among other things, the use of reverse termination fees to address the failure of a financing commitment.

– Strategic transactions borrowed pages from the private equity playbook. Some of the surveyed transactions included terms that historically were more typically associated with private equity transactions, including financing outs and reverse termination fees. However, none of the surveyed transactions included “go-shop” provisions.

– In large transactions, cash remained king even as credit tightened. Despite an expectation that the credit crisis would cause acquirors to favor using stock as consideration, cash-only transactions dominated the survey.

– Fixed exchange ratios continued to dominate stock transactions. In transactions in which stock was all or part of the consideration, the parties almost uniformly opted for fixed, rather than floating, exchange ratios.

– A small number of completed transactions resulted from a hostile approach. Only four transactions of the 50 surveyed were initially rejected by the target’s board of directors after the offers had been made public.

– Tender offer activity increased. Tender offers nearly doubled as a percentage of the surveyed transactions over the two-year period of the survey.

– Broken transactions were infrequent. As of July 31, 2009, all but four of the survey transactions had been completed, an impressive result considering the spate of private equity transactions terminated during the survey period.

– Mergers-of-equals were absent. None of the surveyed transactions were labeled as “mergers-of-equals” by the transacting parties, and none contained all of the traditional attributes of such transactions (such as a “no-premium” offer price for the target’s shares).