M&A in the fashion retail sector

Over the last two years, many household names in the fashion retail industry have disappeared from the Canadian market. In the wake of the ecommerce boom, many stores have raised the white flag and closed their doors. Although ecommerce is a major factor that has made it more challenging for brick and mortar stores to survive, there are other factors. Potential acquirers may have a few reservations before rushing to rescue some of these brands. For one thing, fashion is a fickle creature. To quote a line from a famous fashion guru, “In Fashion, one day you’re in, and the next you’re out.” Acquiring a struggling retailer can be risky business. Marketing and design are major drivers of the fashion industry, and investors would have to be willing to spend more in order to reinvigorate a declining label. Making cost saving strategies ineffective.

A few more wrinkles are cramping the style of fashion M&A. Major global brands are putting pressure on medium to small business by offering competitive prices that are more affordable to the average consumer. Not to mention that with the wave of stores going out of business, malls are more reluctant to allow their tenants out of their store leases, making restructuring more difficult and costly. The numbers don’t lie; “five of the 20 companies involved in the biggest private equity apparel deals of the last decade have been restructured or gone bankrupt”.

The current market conditions have proven that organic growth in the fashion retail sector is no longer a safe bet. But, when one door closes, another opens. Acquisitions are still the best way to prosper, and the trend is shifting to what’s being termed as “Omni Deals”. These involve reconfiguring supply chains, acquisition of ecommerce providers, internet platforms or other technologies that allow consumers to bring the in-store shopping experience home. It also involves “bolt on” acquisitions, pop-up shops, and stores within stores. This strategy appeals to millennials and more tech savvy consumers, and has the added value of providing massive cost saving opportunities. Acquirers can now save on the traditional expenses of real estate and personnel associated keeping the lights on. Online platforms can also provide analytics and consumer data that in-store shopping could never deliver. Private equity investors can thereby snap up opportunities with reduced risk, while catering to the ever evolving consumer preferences.

The author would like to thank Maha Mansour, Summer Student, for her assistance in preparing this legal update.

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The perfect union: maximizing post-integration value

As we have discussed in previous posts, the post-closing phase of an M&A deal can be a difficult one, with 30% of integration deals not achieving their revenue goals. Competing organizational structures, technology, and cultures between the integrating companies often decrease revenue and productivity. Our experience suggests that the following are helpful tips to facilitate successful post-closing integration:

1. Prepare early

Companies planning an M&A deal should prepare early not just for the closing, but also for the integration that follows, especially the first day, as well as the first 100 days. A good integration strategy includes employee training, incentive alignment, and IT preparedness. While the main priority while developing the integration strategy should be increasing shareholder value, companies must also consider and balance financial impact, probability of success, and timeline requirements. Doing so will decrease the duration of the transition period, during which profits and productivity are often lower than average.

2. Create a unique operating model

Companies must modify their operating model to ensure they account for the integration. This must include an accurate and realistic estimated future revenue, based on an elaborative and exhaustive review of both companies‘ sales organizations, and identifying any overlap in customers, products, or nature of sales. Such a detailed review will provide a more accurate revenue estimate, thus managing expectations and planning. It will also ensure that each company’s pre-integration revenue is preserved, further streamlining the integration. The operating model should also ensure that senior leaders from both companies are actively involved in the integration process itself, as opposed to merely focusing on fulfilling their pre-integration duties and only passively participating in the integration process.

3. Develop a dedicated integration team

Companies must also establish a devoted integration committee for the duration of the transition, ideally with a full-time dedicated leader, along with senior leaders and other “A-players” who can allocate adequate time to the committee. Such a team would ensure that the integration plan, and the operating model, are being efficiently applied. The team would also ensure that core processes, including marketing, order processing, and outsourcing, from each company complements the other’s. Furthermore, the team would ensure that skills necessary for carrying out the integration are available internally, and hire externally if not.

4. Communicate with all stakeholders

To the extent practicable, timely, transparent, and consistent communication with all stakeholders involved is crucial for successful integrations. Stakeholders include employees, investors, customers, suppliers, and even the general public. Communications should address the specific concerns raised, give the reasons behind the deal, specify the timing for key actions, and honestly describe both knowns and unknowns. Companies that don’t do so risk losing quality talent, as well as their customers’ and investors’ trust.

5. Ensure cultural cohesion

Finally, companies must actively manage and reconcile the cultural differences between them. As we have discussed in earlier posts, colliding company cultures leads to frustration, low productivity, and higher risks of losing talented employees. Integrating companies must conduct cultural diagnostics, which should include both qualitative and quantitative measures, at the start of the integration, if not earlier. Once completed, a comprehensive strategy for an integrated culture should be created based on a shared vision.

The above recommendations clearly outline the importance of preparing and planning for the integration itself. Just as companies dedicate months planning the M&A deals, they should equally focus on developing, and monitoring, strategies that ensure the integration itself occurs as seamlessly, quickly, and efficiently, as possible.

The author would like to thank Ahmed Labib, Summer Student, for his assistance in preparing this legal update.

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Virtual data rooms: don’t let the cloud cloud your judgment

Platforms that were once physical in nature – such as data rooms – are increasingly becoming digitized. The cloud has opened up new frontiers for data storage: It offers large amounts of storage, collaborative file sharing, and easy access to records at a low cost. On top of all that, the documents are not susceptible to damage as a result of natural disasters, including floods and fire. Consequently, it comes as no surprise that cloud storage may appear a tempting option for a virtual data room.

However, when considering cloud storage, recent high profile cyber-attacks ought to raise a red flag. For example, in August of last year, The Telegraph revealed that hackers stole nearly seventy million passwords from a cloud storage and file sharing platform. The provider confirmed the hackers pilfered the credentials four years prior and circulated the information online. More recently, ZDnet claimed that hackers demanded a provider for a popular cloud storage platform pay a ransom in bitcoin. The hackers allegedly asserted that if the provider did not comply, millions of its customers’ devices would be erased remotely.

While cloud storage might be appropriate for the individual user, it should be used with caution in the business context where sensitive information is at stake. Threats associated with cloud computing include data breaches and data loss, hijacking, and malicious and careless insiders. The Institute of Mergers, Acquisitions and Alliances (the Institute) discussed further disadvantages connected to virtual data rooms. Of utmost concern was, again, security – and the risk is only heightened when the information is stored in the cloud. Because more people have access to confidential information stored in virtual data rooms than to information stored in physical data rooms, the risk of confidentiality abuse and misuse of confidential information is multiplied.

Despite the risk, cloud storage should not be dismissed as an option. The Institute also canvassed the advantages. For example, while cloud platforms differ from provider to provider, many offer text recognition functionalities, allowing users to search specific words and phrases throughout the entire data room. Further, features often allow administrators to restrict the viewing, printing, or downloading of certain documents. In order to benefit from cloud storage’s advantages – and mitigate against its risks – it is important to select a provider that offers the following features:

  • Features that track who is accessing files and what they are doing with them;
  • Document encryption;
  • Two-factor authentication, rather than a single password; and
  • Antivirus software.

Users should also prohibit the sharing of credentials and keep systems up to date. It is crucial to develop an internal security policy, including a thorough incident response plan.

The author would like to thank Elana Friedman, Summer Student, for her assistance in preparing this legal update.

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Big data analytics in the context of M&A

Big data analytics (big data) has established a reputation as a tool useful in the financial services arena, where it has enhanced banks’ abilities to personalize data of their customers to predict trends. More recently, big data is becoming popular in the context of mergers and acquisitions in all sectors.

What is big data analytics?

Big data refers to the collection and analysis of large volumes of structured and unstructured data, in real-time to create value for companies. Big data’s opportunity to leverage unstructured data is the real value-add it provides for companies. Unstructured data refers to information that either does not have a pre-defined data model and/or is not organized in a pre-defined manner. For example, a standard email may contain 3 sets of information that can fit into columns of a table: recipient, subject-line and email body. When compiling thousands of data points, the column of the table that includes the email body (due to the large amount of text) does not provide much opportunity for a user to perform analysis. Big data analytics allows a user to mine this information as well as information stored in social media posts, videos, audio files and images.

Big data potentials in M&A

Ernst and Young (EY) has recently recognized the potential of using big data analytics in private equity deals. They have coined the term “transactional analytics”, which combines 5 aspects of big data: the target’s data, your company’s data, 3rd party data, statistical algorithms, and quantitative analysis. Transactional analytics provides insights and quicker decision making with regards to mergers, acquisitions.

Nearly always, the first step of a merger or acquisition is determining a target. Data analytics can allow buyers to visualize a wider playing field, allowing for comparisons, combinations or cutting of duplicate resources to be made to help maximize revenue and minimize costs.

The amount of competition in the marketplace has shortened due diligence time frames. It is not unusual for this period to be approximately 2-3 weeks. From a due diligence perspective, data analytics provides the opportunity for firms to focus the diligence on the key issues in order to drive a quicker close. According to EY, the number one reason for reducing an offer price or walking away from deal is a lack of information. Big data allows executives to draw insights from new data sets, arming them with unrealized information. For example, in a retail deal, data analytics can reveal how customers are segmented, what they’re buying, when they’re buying and the influences on that buying behavior.

In addition, big data also adds value to companies after the close by allowing for the quicker realization of synergies between the merging companies. For example, during the due diligence process, the buyer can look at the potential target’s customer base, compare it to their own customer base and identify areas and opportunities for cross-selling and up-selling. This provides for immediate advantages after the close.

The author would like to thank William Chalmers, Summer Student, for his  assistance in preparing this legal update.

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Specificity is key: six archetypes of successful acquisitions

Canadian M&A activity has continued to rise in 2017, but with the successes come many more stories of failure. Studies indicated that 70% – 90% of acquisitions ultimately fail. How does a company beat these odds? A recent article by McKinsey & Company suggests that companies who enter into acquisitions with a specific value proposition in mind tend to have higher success rates than those with vague, growth strategies. In particular, the authors suggest most successful acquisitions implement one of six strategic models.

Improve the target company’s performance

One acquisition strategy involves purchasing a target company to reduce its costs and improve margins and cash flows. According to McKinsey, many private-equity firms follow this model by buying, improving and selling a target succinctly to achieve greater increases in their operating-profit models. There is one caveat: a company’s ability to improve margins is influenced by how low or high the target’s margins and return on invested capital are pre-acquisition.

Consolidate to remove excess capacity from industry

To reduce capacity while preventing a loss in market share, many companies choose to implement cut-backs post-acquisition rather than create a smaller company by shutting down low-performing segments on their own. The pharmaceutical industry is a prime example, as many companies reduce the capacity of their sales force and R&D teams by re-examining post-merger portfolios. Managers should be aware, however, that the immediate value-add following these acquisitions skews towards seller’s shareholders and also runs the risk of benefiting competitors free of cost.

Accelerate market access for the target’s (or buyer’s) products

This successful model involves purchasing companies to accelerate their sales. Many relatively small companies with unique, innovative products, can expand their sales force through a merger with a larger company. In other cases, the target and acquiror can build each other’s revenue growths by introducing different and previously untapped markets.

Get skills or technologies faster or at lower cost than they can be built

Don’t build it, buy it! A model often seen in the technology sector is purchasing a company that possesses technology the acquiror needs for its own products. McKinsey lists three reasons a company might utilize this strategy: (i) acquisition of technology is faster than development, (ii) companies avoid royalty payments on patented technologies, and (iii) it may keep the technology away from competitors.

Exploit a business’s industry-specific scalability

Companies often cite economies as scale as a motivator for acquisitions, but McKinsey cautions it is best reserved for situations when the deal will result in a large increase in a company’s incremental capacity or when a larger company buys a subscale one. Two large companies, operating efficiently, will not produce the necessary gains to justify an acquisition, nor will generic economies of scale strategies. So, potential acquirors should assess the relative uniqueness and size of the acquisition to ensure its worth.

Pick winners early and help them develop their business

The final strategy involves acquiring targets early in the life cycle of a new industry or product line. This strategy, while having the potential for significant gains, requires disciplined management. To be successful, an acquiror must be willing to make investments before the market sees the industry’s or company’s potential, recognize that it will need to acquire multiple companies, knowing some will fail, and have the skills and patience to help the target reach their potential.

Harder strategies

In addition to the six main strategies McKinsey puts forward, the article also lists several other strategies used to create value that are more difficult to implement:

  1. The roll-up: a strategy used to consolidate highly fragmented markets where the current competitors are too small to achieve scale economies. The strategy often works when a collective group of businesses realize the cost savings or revenue gains of pooling their resources.
  2. Consolidating to improve competitive behaviour: a strategy used to consolidate multiple companies in a highly competitive market with the hopes of lessening price competition. McKinsey warns, however, that unless the acquisitions result in three to four end competitors, pricing behavior is unlikely to change.
  3. Enter into a transformational merger: a strategy used when the reason for an acquisition or merger is management’s desire to transform one or both companies. Here, the combination of businesses only serves as a platform to the larger goal of creating a new company structure.
  4. Buy cheap: a strategy used when an acquiror purchases a target at a price below a company’s intrinsic value. The opportunities for such strategies are rare and McKinsey warns acquirors to beware of overvaluing a target’s worth or falling prey to market bubbles.

While there is no set formula for producing a successful acquisition, it is important for managers to be aware of the potential for failure and keep a specific goal in mind. In addition, the value of any transaction will ultimately be diminished if the price is set too high. These archetypes can help managers evaluate their acquisition decisions by narrowing an acquiror’s focus and measuring the acquisition’s tangible gains.

The author would like to thank Abigail Court, Summer Student, for her assistance in preparing this legal update.

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Artificial intelligence: real results

Earlier this year, we discussed the increasing use of technology in the M&A deal process. To recap, a recent Mergermarket study revealed that the use of technology and big data were likely factors in the increasing frequency of unsolicited bids and corresponding decrease in frequency of broad auctions. Building on our earlier discussion, we now consider below the ways in which technology is used to facilitate deals.

Due diligence process

Artificial intelligence has already had significant influence on the due diligence process. For example, Kira Systems, an artificial intelligence contract analysis company, claims that their software has been used on over $100 billion worth of transactions. In a recent article, Bill Stoffel, US Private Equity Leader at EY commented that the amount of competition in the market has made the speed of completing diligence critical, with many diligence periods lasting two or three weeks.

Noah Waisberg, co-founder of Kira, claims that his company’s Diligence Engine can reduce 6½ hours of work by two junior lawyers to 2½ hours of work by one junior lawyer. Kira’s Diligence Engine uses machine learning algorithms to analyze the language within a collection of contracts or other documents to identify provisions dealing with a specific issue.

Deal sourcing

More recently, firms have started to deploy artificial intelligence as a way to identify potential acquisition targets. This application of artificial intelligence involves running collections of data through machine learning algorithms to identify factors that increase the likelihood of a successful deal. The Aingel platform claims to do just that. Founded after over a year of research at NYU, the platform scores potential targets on their likelihood of a successful exit by analyzing data from a database of past deals and their outcomes.

In a recent interview with McKinsey & Co, Managing Partner of Hone Capital Veronica Wu described how her firm developed a machine learning model to identify potentially successful targets on AngelList. In particular, their model found that start-ups with an average seed investment of $0.5 million generally failed. Interestingly, the model also uncovered that start-ups whose founders’ university degrees came from different schools were more likely to advance to a series A round of financing.

While it may be unlikely that deals are won or lost based on a founder’s alma mater, artificial intelligence can be used to provide insight into companies that is not always apparent to the naked eye.

The author would like to thank Daniel Weiss, Summer Student, for his assistance in preparing this legal update.

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Seller beware: sandbagging in Canadian private M&A

What is sandbagging?

The practice of sandbagging—whereby a purchaser discovers a breach of a representation or warranty on part of the seller during negotiations but nonetheless closes the deal only to then seek indemnification for the breach—continues to plague practitioners in Canadian private M&A.

In what is frequently one of the most contentious issues in these deals, both buyers and sellers aim to safeguard their interests by shifting risk to the opposing party via pro- or anti-sandbagging clauses. Buyers will aim to insert “No Waiver” clauses which provide that knowledge of any breach does not strip the buyer of the ability to seek restitution post-closing, the idea being that this incentivizes full disclosure and helps reduce the risk of a last-minute surprise derailing the transaction. Sellers will naturally seek to include provisions that disentitle a buyer from being able to advance such a claim for restitution, and argue that this helps minimize the risk of costly and unnecessary litigation after the transaction is completed.

Sandbagging provisions in Canadian M&A

In light of the risks associated with sandbagging, one would expect to see practitioners deal with the issue as a routine part of transactions. Instead, Canadian practitioners seem to prefer a ‘wait and see’ approach in which they simply hope that the problem will not materialize post-closing.

According to Practical Law Canada’s What’s Market: Legal Trends in Canadian Private M&A (subscription required) in 2017, more than 50% of transactions remained silent on the issue and did not include either pro- or anti-sandbagging provisions (the remaining transactions were split roughly equally between pro- and anti-sandbagging clauses). Although this may be surprising, it merely underscores the difficulties practitioners, and clients alike, face in this area.

Canadian courts’ views on sandbagging

This challenge is further complicated by the fact that Canadian courts have provided little guidance as to whether pro- or anti-sandbagging provisions will be enforced in the courts. Instead, the recognition in Bhasin v. Hrynew, (2014 SCC 71) of good faith as a general organizing principle in the relations between contracting parties only raises further questions as to whether these provisions will be given legal effect.

In Bhasin v. Hrynew, Justice Cromwell’s finding that “parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract” may lead one to believe that the days of sandbagging in Canada are numbered; however, this assumption would be premature. Justice Cromwell was careful to add that the content of the duty of good faith and honest performance is a highly contextual matter, and will depend on the nature of the relationship between the parties. As a result, the content of the duty of good faith and honest performance will depend on, amongst other things, the sophistication of the parties involved in a transaction. Presumably, this means that pro- or anti-sandbagging clauses will be given effect in some but not in other transactions. What remains certain is that until the courts provide further guidance, Canadian practitioners may wish to continue avoiding the issue wherever possible.

The author would like to thank Felix Moser-Boehm, Summer Student, for his assistance in preparing this legal update.

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Blockchain technology: an imminent driver of investment and M&A

Blockchain technology has been making headlines since it emerged in 2009 in connection with the cryptocurrency Bitcoin. We’ve covered the potential use of Bitcoin in M&A transactions in previous articles in 2016 and 2014. As discussed in these articles, the volatility and lack of central authority has so far meant that the cryptocurrency plays a niche role in the capital markets.

However, blockchains – the technology behind Bitcoin – has been gaining ground for its exciting enterprise potential. We are already beginning to see companies racing to adopt this emerging technology, as more and more companies acquire the technology through M&A or amp up their research and development in this area.

What is blockchain technology?

A blockchain is essentially a digital ledger that can be independently verified by unrelated parties. The entries in the ledger are stored in blocks, each block containing a timestamp and a link to the previous block. The implication of this technology is that any information that appears on the ledger is immutable and, therefore, guaranteed to be authentic.

Blockchain’s enterprise potential

It is not hard to imagine the potential enterprise applications for a decentralized, tamper-proof database. Below are some key use cases.

  • Transaction settlement was one of the key reasons Bitcoin became popular. Blockchains can irreversibly and verifiably settle transactions in a matter of seconds without the need for a centralized, trusted intermediary such as a bank. When combined with the idea of smart contracts, which are contracts written into code and can be self-executing and self-enforcing, the possibilities are endless. For example, the San Francisco Stock Exchange recently hinted that it is aiming to “build the first smart contract-driven public platform for buying and selling US small business financial securities” using blockchain technology. Also, this year the Royal Bank of Canada released a plan to deploy a blockchain-based system for its loyalty rewards program which would allow users to collect and redeem points instantly.
  • Know Your Client (KYC) has been identified as an area that could stand to benefit by using blockchain technology. A 2016 survey by Thomson Reuters revealed that the average financial institution spends $60 million per year to meet their KYC obligations with some firms spending up to $500 million on compliance. A recent whitepaper by the FinTech Network argued that this cost could be mitigated by storing KYC data on an independently verifiable database such as on blockchains.

Investment in blockchain technology

Companies are rapidly catching on to the exciting potential of blockchain technology. Some companies, such as Airbnb and Spotify, have made significant acquisitions of blockchain-related startups. Other companies are exploring the technology by investing in research and development. In a Deloitte survey of 208 senior executives, 25 percent of the respondents indicated that their companies have already invested $5 million or more in blockchain technology. In fact, PwC reports that “nearly every financial institution” was involved in some kind of research involving blockchains. We look forward to seeing how this trend plays out.

The author would like to thank Daniel Weiss, summer student, for his assistance in preparing this legal update.

Exciting new technologies for corporate legal transactions

The legal industry is not immune to the influx of new technologies designed to make our lives, and equally if not more importantly, those of our clients, easier and more efficient. Early last year, we reported on content management tools that revolutionized the way due diligence is performed in M&A transactions. Since then, new technologies have emerged aimed at simplifying document management in closing a deal. While still relatively new, one of the more promising technologies is virtual closing rooms.

Virtual closing rooms

Virtual closing rooms are designed to facilitate a secure, user-friendly and simple closing process. Some of the unique features offered by these new technologies include:

  • secure cloud-based login, which allows administrators to choose the functions available to each user or group of users or law firm;
  • electronic signature pages allowing for speedy document execution – clients are able to upload their signatures and have them verified by phone or email allowing for the electronic signing of documents, eliminating the hassle and cost associated with arranging in-person signatures;
  • a collaborative dashboard that can be shared with all parties involved in the transaction – regardless of what side you are on, you can quickly check the progress of any deal, including what signatures are still required and what documents have yet to be finalized;
  • a user-friendly colour scheme designed for the quick and efficient spotting of issues;
  • the ability to pull up any draft of any document, complete with automatically generated redline changes and mark documents as final when no more changes are necessary; and
  • automatically generated closing records allowing for easy recordkeeping of the transaction.

Essentially, these virtual closing rooms completely replace the physical closing rooms that often contained hundreds of folders and countless drafts of numerous agreements. This allows for all documents and signatures to be organized, accessible and easily tracked. Having a centralized system for all of your corporate documents will save countless hours of printing, tabbing, and delivering of documents.

It should be noted that, in our experience, in-person closings, and thus, physical closing rooms, are in steep decline. Whether through the use of virtual closing rooms or electronic closings (whereby documents are finalized and shared typically among the parties’ counsel), technology is hugely impacting the way in which M&A transactions are conducted and ultimately closed.

From the client’s perspective, virtual closing rooms and similar efficiency-saving technological developments in the legal industry go a long way to streamlining the provision of legal services, allowing for cost savings. This is music to clients’ ears.

The author would like to thank Travis Bertrand, Summer Student, for his assistance in preparing this legal update.

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Key findings: SRS Acquiom 2017 deal terms study

SRS Acquiom recently published its 2017 Deal Terms Study. The report draws on data from 795 private-target transactions that closed between 2013 and 2016 using SRS Acquiom’s services. The results of this study offer a unique and valuable perspective of private M&A transactions that might not otherwise be reported. Some of the key findings are outlined below:

Financial terms:

  • Consideration: After a mild decline from 6% to 4% from 2013 to 2015, all-stock deals shrunk to a total of 1% of deals in 2016. Cash/stock combo deals also shrunk to 15% from 21% of deals in 2015 although the 2016 figure is in line with what was seen in 2013 and 2014. Similarly, the proportion of deals in which the buyer assumed options shrunk to 20% from 26% in 2015.
  • Earnouts: 14% of non-life sciences deals included earn outs in 2016 which was the same level seen in 2015. While earnouts in deals completed in 2015 were more focused on traditional metrics such as revenue and earnings, earnouts in 2016 were more significantly based on achievements such as unit sales, product launches and asset divestiture.

Closing conditions

  • Materiality Threshold for Seller’s Representations: A narrow majority of deals required that the Seller’s representations be accurate “in all material respects.” In most other deals, inaccuracies in the Seller’s representations were permissible if they could not be reasonably expected to have a material adverse effect. A small number of deals required the Seller’s representations to be accurate “in all respects.” Notably, deals where the representations were required to be accurate at signing were about twice as likely to require accuracy “in all respects.”

Indemnifications terms

  • Indemnification Survival Period: Deals that closed in 2016 saw a slightly decreased survival time. In 2016 50% of deals included survival periods less than 18 months whereas in 2015, that proportion was 43%.
  • Indemnity Caps: In all deals studied, the median indemnity cap was 10.2% of transaction value. Most deals included an indemnity cap that was less than 15% or less of the total transaction value.
  • Baskets: Baskets continue to be a popular deal term, found in 95% of 2016 deals. In particular, deductible baskets become more prominent rising to 42% of all baskets in 2016 from 30% in 2015. First dollar baskets continue to be the most popular with combinations being quite rare. Since 2013, median deductible baskets grew from 0.61% to 0.73% of transaction value.


  • Financing Rounds vs Transaction Value at Exit: Generally, deals where the target underwent more equity financing rounds increased the transaction return multiple, although this correlation becomes less clear after five rounds of financing.

  • Foreign Buyers Earned Higher Multiples: In all deals that closed in 2016, foreign buyers earned a 7.7x multiple on average. Private investors earned the lowest average multiple at 4.8x with public and financial investors in the middle at 6.6x and 6.7x respectively.

The author would like to thank Dan Weiss, Summer Student, for his assistance in preparing this legal update.

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