M&A Study reveals US deals differ significantly in their construction from those in Europe

CMS publishes 5th European M&A Study

Mar 18, 2013, 10:41 ET from CMS Legal Services

FRANKFURT, Germany, March 18, 2013 /PRNewswire/ -- In a review of 1,700 deals done between 2007-2012, CMS' fifth annual M&A Study shows that there are key differences in the risk allocation between the US and Europe – reflecting interesting cultural and regulatory variations in the markets.

"Now in its fifth year, the M&A study is fascinating reading for businesses looking to do deals across borders, and understand the norms in other countries," said Cornelius Brandi, Executive Chairman of CMS. "It exemplifies the value that CMS delivers to clients in providing both multi-national expertise and a deep understanding of the issues that drive businesses today."

Thomas Meyding, Head of CMS Corporate Group, comments, "Our analysis of the deal structures chosen illustrates very different behaviours on either side of the Atlantic. Attitudes to risk and reward vary significantly and this is clearly shown by the legal provisions that are used."

For example, MAC clauses are much more popular in the US (being used in 93% of deals) than in Europe where they only appear in 14%. Another sizeable difference exists in the use of working capital adjustments as a criterion for purchase price adjustment, used in 77% of cases in the US as opposed to just 34% in Europe. The explanation for this may simply be the diversity that one sees in 50 different countries as opposed to 50 different states in one country.

Other key findings include:

  • Earn-out deals are more popular in the US. 38% of US deals had an earn-out component compared with just 16% in Europe in 2012.
  • Not only are baskets much more prevalent in the US, but the basis of recovery is different. In the US, 62% of relevant deals are based on 'excess only' recovery as opposed to 'first dollar' recovery compared with only 29% in Europe in 2012 for 'excess only' recovery.
  • Basket thresholds tend to be lower in the US with 88% being less than 1% of the purchase price compared with 49% in Europe and that is probably because there is less payback for purchasers because of the prevalence of "excess only" recovery.

Meyding concludes, "Europe may not seem as exciting as some of the emerging economies, but there is no doubt that US businesses are certainly keeping an eye out for opportunities there.

"There are, however, good reasons for optimism in 2013. Many corporates have strong balance sheets and access to cash. Private equity owners always need to realise investments at certain stages of their life cycle and many are nearing the end of their investment holding period. Many US corporations are increasingly ready to make acquisitions, including European acquisitions, as they benefit from US energy self-sufficiency and lower energy costs."  


CMS lawyers immerse themselves in their clients' business. This enables them to deliver the most effective legal and tax solutions. Both leading domestic and major global corporations work with CMS´ 2,800 lawyers across 54 offices in Europe, Russia, China, North Africa and South America.  Clients select CMS because it has the most extensive footprint in Europe of any firm. CMS provides local and industry sector insight, global project management and its specialist teams work hard to add value to their projects, wherever they are taking place. Established in 1999, CMS today comprises ten member firms, all experienced in their local jurisdictions.  This expertise means that clients receive high-quality advice in the local context.  CMS firms posted a combined turnover of EUR 808m in 2011.  For more information, please visit www.cmslegal.com.

SOURCE CMS Legal Services