September 21, 2023 — Seyfarth Shaw LLP has just released the 9th edition of its Middle Market M&A SurveyBook (“2022/2023 Survey”). This year’s survey analyzes key transaction terms from more than 105 middle market private target acquisition agreements signed in 2022 and the first half of 2023.
The 2022/2023 Survey focuses on key deal terms, including those comprising the “indemnity package” found in most private target acquisition agreements to address a seller’s potential post-closing liability to a buyer and to set the parameters of a buyer’s ability to claw back purchase price from a seller.
“While each deal has its own set of unique facts and circumstances which drive deal terms and negotiations, what’s market is a question we are continually asked by clients in negotiating M&A transactions and having the latest trends and data at our fingertips is always valuable,” said Suzanne Saxman, chair of Seyfarth’s Mergers & Acquisitions practice.
The terms covered in Seyfarth’s Middle Market M&A SurveyBook include:
- Indemnity Escrow Amount
- Indemnity Escrow Period
- Representation & Warranty General Survival Period
- Carve Outs to General Survival Period
- Indemnity Basket
- Indemnity Cap
- Fraud
After the record-breaking volume and value of US M&A activity in 2021, given the change in market conditions, it came as no surprise that M&A activity in 2022 did not come close to matching 2021 levels. M&A activity in the first half of 2023 continued to stall, failing to even reach comparative 2022 levels, but there is optimism looking forward.
“There are indications that the last quarter of 2023 and driving into 2024 will be a resilient period for middle market M&A activity,” said Andrew Lucano, vice-chair of Seyfarth’s M&A practice. “We believe the combination of potential increases in strategic divestitures by larger companies, the continued high amount of uninvested ‘dry powder’ in the market available for deal making, a more stable interest rate environment, taming of inflation, and increased technology adoption and innovation in M&A could spur middle market M&A activity from the subdued scene experienced earlier this year.”
Notable findings from Seyfarth’s 2022/2023 Survey include:
- Continued heavy use of representation & warranty (“R&W”) insurance.
- Public-style “no survival” deals trending upwards in deals using R&W insurance.
- Increased use of more seller-friendly definitions of “fraud” for purposes of the fraud exception.
- Decreased indemnity escrow usage when R&W insurance is involved.
To view Seyfarth’s 2023 Middle Market M&A SurveyBook, please visit here.
About Seyfarth
With more than 900 lawyers across 18 offices, Seyfarth Shaw LLP provides top tier advisory, litigation, and transactional legal services to clients worldwide.
Contact: Tom Mariam, Director of Public Relations: 212-218-3366 or tmariam@seyfarth.com
