Emerging Markets Law

ABA Business Law Section Deal Points Study

The ABA Business Law Section (M&A Committee) released its fourth annual private deal points study. The report is only available to BLS members, but some of the high points include:

  • The ABA study looked at a set of private company M&A transactions completed in 2013. The study set included a total of 136 deals ranging from $17.2 million to $4.7 billion in total transaction value.
  • The study looks at several key points in private M&A deals, including purchase price adjustments, earnouts, MAE representations, knowledge qualifiers, conditions to close and indemnification provisions.
  • 91% of the deals studied included a post-closing purchase price adjustment for changes in working capital but only 3% had a similar adjustment for changes in the purchased assets.
  • 91% of the deals studied, in their definition of “material adverse effect” excluding any adverse effect resulting from (a) changes in local, domestic, foreign or international economic conditions, (b) changes affecting generally the industries or markets in which the Target operates, (c) acts of war, sabotage or terrorism, military actions or the escalation thereof, (d) any changes in applicable laws or accounting rules or principles, including changes in GAAP, (e) any other action required by this Agreement or (f) the announcement of the Transactions.
  • Of those deals that have a “material adverse effect” carve-out like the one described above, roughly 91% of those deals have a “disproportionate effect” qualification (so that the impact will be an MAE if the event has a “disproportionate effect” on the Target).

The study includes a wealth of information on what is “market” in the private M&A market and I would recommend it to practitioners in this space.

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