"Seller's Market" Conditions Reflected in Key Deal Terms, GF Data® Finds
WEST CONSHOHOCKEN, Pa., Oct. 15, 2015 /PRNewswire/ -- The average cap on indemnification of middle-market private equity sponsored deals valued between $10 and 250 million dropped an average of 5 percent in the first half of 2015, according to GF Data's Fall 2015 Key Deal Terms Report. The decline is evidenced across all size categories and across the major business categories within GF Data's universe. Average escrow/holdback also declined in the year to date, continuing a more or less steady decline since 2010.
"This report provides powerful evidence that the market conditions that have been so accommodating to middle-market business sellers in terms of price have translated into favorable transaction terms as well," said Andrew T. Greenberg, CEO of GF Data.
The semi-annual report, which tracks completed deals from over 200 North American PE firms on a confidential basis, also noted a reduced survival period after closing during which a buyer may assert a breach or reps and warranties against a seller.
Jeff S. Dinerstein, a Dallas-based partner at the Jones Day law firm, commented: "The report reinforces that we are still in a seller's market. Reduced indemnification caps with respect to representation and warranty claims as well as smaller escrows relative to total deal value are generally consistent with several middle market transactions I have been involved with in 2015."
The report also brought to light interesting shifts in the treatment of deals featuring seller financing or earnouts. The incidence of deals featuring seller financing or earnouts remained nearly constant from 2014 to 2015, yet the discount on those deals compared to deals without those characteristics increased by 1.1x turn of EBITDA.
About GF Data®
GF Data provides reliable external information for use in valuing and assessing M&A transactions to private equity firms, investors, lenders and other users.
GF Data collects and publishes proprietary transaction information from private equity groups on a blind and confidential basis. The pool of active contributors comprises more than 200 private equity firms, mezzanine groups and other financial sponsors.
GF Data® is a registered trademark of GF Data Resources LLC.
For information on subscribing or on contributing data as a private equity participant, please contact Bob Wegbreit at [email protected] or 610-260-6263.
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SOURCE GF Data Resources LLC
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