Tag archives: private M&A

Key findings: 2018 SRS Acquiom Buy-Side Representations and Warranties Insurance (RWI) Deal Terms Study

SRS Acquiom recently published its first Buy-Side Representations and Warranties Insurance (RWI) Deal Terms Study. The study analyzed the terms of 588 private-target acquisitions that closed between 2015 and 2017, the majority of which are not required to be publicly disclosed. As Canadian M&A deals continue to use RWI at an increasing pace, insights from firms such as SRS Acquiom offer valuable perspective on popular terms in RWI covered deals. Some of the study’s key findings are outlined below.

Financial terms

  • Escrow. One of the most pronounced effects of RWI coverage is the reduction in the amount of
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Materiality scrapes in private M&A transactions

Representations and warranties in private M&A transactions are typically heavily negotiated, with sellers often attempting to qualify their representations with materiality to avoid being found liable for immaterial breaches and for immaterial damages. It is also common during the course of negotiations for parties to agree to the inclusion of indemnity baskets. These provisions provide that the seller will not be liable for a breach of its representations unless the loss suffered by the purchaser as a result of such breach exceeds a certain minimum (or, “material”) amount.

The Double Materiality Scrape

To counteract the seller-favourable implications of materiality qualifications … Continue Reading

Buyer beware: sell-side termination fees are on the rise

M&A transactions typically involve costly and time-intensive processes, and for this reason parties often seek to limit completion risk by negotiating a termination fee. Indeed, the recent 2018 SRS Acquiom Deal Terms Study reveals that the use of termination fees in private M&A transactions doubled in 2017.

From 2012 to 2016, the use of termination fees remained relatively stable, with approximately 10% of private M&A deals including termination fees.[1] In 2017, however, the use of termination fees increased dramatically, with 21% of private M&A deals reportedly incorporating termination fees.[2]

Interestingly, the overall increase in the use of termination … Continue Reading

Enforcement of restrictive covenants in commercial transactions

Restrictive covenants are often a key mechanism by way of which the buyer of a business is able to protect the value of their purchase. Indeed, in a 2017 review of legal trends in Canadian private M&A, Thomson Reuters has reported that non-competition covenants were found in 52% of the closing conditions of share acquisition transactions.

While such covenants are common, their enforcement has remained an ongoing concern due to the strict reasonableness requirements imposed by the Supreme Court of Canada in JG Collins Insurance Agencies Ltd. v Elsley, [1978] 2 SCR 916 in order to balance the parties’ … Continue Reading

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