SAN FRANCISCO--(BUSINESS WIRE)--Private-target M&A activity has rebounded, but there is still a backlog of attractive acquisition targets, according to data released today. SRS | Shareholder Representative Services, the leading post-closing expert for private company mergers and acquisitions, today announced the release of the 2011 SRS M&A Deal Terms Study. The study, which looks at multi-year trends for the first time, analyzes a broad cross-section of venture and private equity-backed transactions.
“SRS reviews hundreds of M&A purchase agreements every year,” said Paul Koenig, Managing Director at SRS. “With this study, we have the opportunity to provide valuable information to the deal marketplace, offering both buyers and sellers benchmarks that they can apply in their deals and trends analysis that can help them set expectations and make more informed decisions.”
The new study analyzes data from acquisitions of venture capital and private equity-backed companies across a variety of industries. Data presented in the study is aggregated from 196 deals, and includes year-over-year comparisons for terms where the data demonstrates a notable variance or trend.
“The M&A market is robust and that’s good news for both buyers and sellers,” said Mark Vogel, Managing Director at SRS. “SRS sees a breadth of transactions that aren’t typically publicly reported, and through our studies, we are able to share our unique perspective with the M&A deal community.”
Trends analysis reveals that strategic and financial buyers are purchasing more mature companies, which have consumed more rounds of equity financing and increasingly achieved profitability. Supporting data demonstrated in the study includes the following:
- In 2010 and 2011, there was a substantial increase over the preceding years in the percentage of target companies that exited with positive EBITDA.
- During the same period, there was an increase in the average number of equity financing rounds by time of exit.
- The use of management carveout plans for companies sold in 2010 and 2011 was significant (33% and 25% of deals respectively).
- The percentage of all-cash deals steadily increased from 2009-2011, which was in line with economic data, such as historically low interest rates and recovering credit markets.
- Earnouts continued to be a significant factor in deals. When earnouts were included, the ratio of the earnout to closing payment ranged from 69%-93% on average for deals from 2009-2011. The percentage of deals where the earnout includes a revenue milestone steadily increased over the last three years.
- The average survival period, generally the time period after closing in which the buyer may make a claim against the selling shareholders for a breach of most representations and warranties, also increased steadily from 2009-2011, keeping a portion of deal consideration at risk well into the future.
The full 2011 SRS M&A Deal Terms Study is available on the SRS web site, www.shareholderrep.com.
SRS | Shareholder Representative Services is the global expert in professionally managing the post-closing process to safeguard the selling shareholders' interests in private company M&A transactions. As the shareholder representative, SRS manages all post-closing matters, including working capital and other purchase price adjustments, tax reviews, earnouts, the handling of claims, disputes and litigation, communications with acquirers and selling shareholders, and management and distribution of escrow and expense funds.
SRS has a senior-level team of more than 30 attorneys, financial professionals, and operations and systems experts and the most sophisticated operational, tracking and reporting systems ever used by a shareholder representative. On deals valued in aggregate in excess of $25 billion, SRS has represented more than 400 venture capital and private equity firms and over 25,000 shareholders in 44 countries. No one has as much knowledge and experience in serving as a shareholder representative and navigating the issues that arise post-closing than SRS. For more information visit www.shareholderrep.com.