September 26, 2018

PE Buyer/Public Target Deal Terms Study

Schulte Roth recently released this study of deal terms for 2015-2017 M&A transactions involving private equity buyers & public company targets. Here are some of the key takeaways:

– Approximately 84% of all 2015–17 transactions were structured as one-step mergers rather than two-step tender offers followed by back-end mergers. Over 90% of large deals (>$500mm) were structured as one-step mergers, while 70% of the 2015–17 middle-market deals (>$100mm) were structured as one-step mergers.

– Go-shop provisions were included in approximately 33% of the 2015–17 large deals and 20% of the 2015–17 middle-market deals. The average length of the go-shop period was 37 days.

– 81% of large deals had financing “marketing period” provisions, while those provisions appeared in only 15% of middle market transactions.

– All deals surveyed provided the buyer with “match rights,” and all but one included a “last look” provision.

– 81% of large deals and 45% of middle market deals included some form of limited specific performance provision.

Termination fees averaged 2.4% of equity value for large deals & 3.3% of equity value for middle-market deals. Interestingly, the average size of the buyer’s reverse termination fee declined from 6.5% of the target’s equity value during 2013-2014 to 4.5% of its equity value during 2015-2017.

John Jenkins