February 23, 2023

Take Private Deals in 2022

A recent Weil going private survey showed that going private transactions reached a new high in 2022 by volume and value (up 51% from 2021), with over half of the targets in the technology/software space. The increase from 2021 slowed in the second half of the year due to macroeconomic conditions and uncertainty and the state of debt financing markets.

The survey attributes this increase, in the face of an otherwise depressed M&A market to:

– the pressure on public company valuations and stock prices due to financial/political turmoil and market sell-off making public companies more attractive targets when fundamentals are strong; 

– companies who were quick to go public—maybe a little too quick during previous heights of the public markets and de-SPAC transactions—feeling strained by the burdens that accompany being publicly traded; and 

– boards realizing that market high valuations may have been inflated and that premiums to a current price, rather than record price, present an opportunity to maximize value.

The survey goes on to review some interesting developments in take private transactions in recent years, including the focus on interim operating covenants and consequences of breaches, complications for recently de-SPAC or IPO companies and the sharp uptick in the use of CVRs (contingent value rights) in 2022.

Speaking of CVRs, in Q4 2022, Nasdaq proposed to adopt Listing Rule 5732 to provide standards for listing Price-Based and Event-Based CVRs on the Nasdaq Global Market. The SEC recently solicited comments on an amended form of the listing rule and approved the proposed rule, as amended, on an accelerated basis.

– Meredith Ervine