srs deal terms study

M&A Deal Terms Study | 1 www.shareholderrep.com 2010 SRS M&A Deal Terms Study | 1 www.shareholderrep.com © 2010 Shareholder Representative Services LLC. All rights reserved.


2010 SRS M&A Deal Terms Study Summary Highlights from a comprehensive study of deal

terms in private-target M&A transactions

© 2010 Shareholder Representative Services LLC. All rights reserved.

GO TO www.shareholderrep.com/study for the full 2010 SRS M&A Deal Terms Study

http://www.shareholderrep.com/study



The SRS M&A Deal Terms Study surveys the terms of 88 private-target acquisition agreements in transactions for which SRS served as the shareholder representative.

The agreements surveyed date from July 2007 through July 2010.

Slides that compare the results of this Study to those of the 2009 Private Target Mergers & Acquisitions Deal Points Study conducted by the American Bar Association (ABA) have been included for those topics with respect to which SRS believed the data displayed an interesting trend or variance.

Overview of M&A Deal Terms Study Sample

The findings presented herein do not necessarily reflect the views of SRS. Further, the terms of the agreements surveyed in this Study were drafted in a myriad of ways and may not fit precisely into the categories included in this Study. Therefore, the drafters of the Study made frequent and various judgment calls to categorize provisions in a meaningful way. As a result, the conclusions presented in this Study may be subject to important qualifications that are not expressly articulated herein.





What’s Different The underlying deals for this Study come from a different pool of transactions than those used in prior studies. Specifically, our Study surveyed deals on which SRS has been engaged as the shareholder representative, most of which are not publicly reported. We do not believe our data is better or worse than other studies. Rather, it simply represents the results from a different sampling of transactions. Our hope is that having multiple data points on these issues from the various studies will give deal professionals greater knowledge in negotiating and advising clients.

Process This Study is the result of a comprehensive analysis of the terms of all surveyed deals. All findings were analyzed and reviewed by attorneys, accountants and professional staff internally at SRS. When a discrepancy surrounding an interpretation of a term arose from two primary independent reviewers, the matter was escalated to a third reviewer. All results were also separately reviewed by senior staff members.

Future Studies SRS plans to release subsequent studies on an annual or bi-annual basis. We also plan to add results related to what happens after closing and why. We appreciate any thoughts or feedback you may have.

About this Study





Escrow size/period   2/3s of deals have escrows in excess of 12 months   59% of deals have escrows in excess of 10% of deal value

Post-closing purchase price adjustments   2/3s of deals have post-closing purchase price adjustments

Survival period   95% of deals have carveouts to the survival period so that certain types of claims can be brought well into the future

Earnouts   25% of deals have earnouts   1/3 of earnouts have periods in excess of 5 years   59% of deals allow the buyer to offset indemnity payments against earnouts

Summary of Key Findings




SRS Study Sample Overview – By Transaction Value*

Less than $25M 29%

$25M-$50M 17%

$50M-$100M 14%

$100M-$150M 12%

$150M-$200M 14%

$200M and above 14%

* Transaction values do not include earnouts. GO TO www.shareholderrep.com/study for

the full 2010 SRS M&A Deal Terms Study




SRS Study Sample Overview – By Industry

Biopharmaceuticals 5%

Telecommunications & Networks

8%

Computer Hardware & Electronics

20%

Consumer & Business Products

2%

Consumer & Business Services

17% Greentech

1%

Media & Entertainment 5%

Medical Devices & Equipment

6%

Other Healthcare 3%

Information Technology & Software

33%





Post-Closing Purchase Price Adjustments (SRS/ABA Comparison)

Includes Adjustment Provision

68%

No Adjustment Provision

32%

0%

73%

43%

2%

30%

23%

2%

77%

29%

6%

19%

26%

Earnings

Working Capital

Debt

Assets

Cash

Other

SRS

ABA (Subset: includes adjustment)

Adjustment Metrics*

Includes Adjustment Provision

79%

No Adjustment Provision

21%

SRS

ABA

Financial Provisions >

* 42% of the post-closing purchase price adjustments in this Study were based on more than one metric; for example, both a Working Capital and Debt adjustment, or both a Working Capital and Closing Cash adjustment.





Earnouts

* Examples: receipt of regulatory approvals, attainment of post-closing contracts, product launches.

Includes Earnout

25%

No Earnout 75%

(Subset: includes earnout)

EARNOUT METRICS


41%

5%

13%

41%

Revenue

Earnings/EBITDA

Combo of Above

Milestone Events*




Earnouts – Period of Earnout

(Subset: deals with earnouts)

9%

9%

27%

5%

9%

9%

32%

<12 months

12 months

12 - 24 months

24 months

36 months

36 - 60 months

>60 months






Survival/Time to Assert Claims* (generally)

* These periods apply to representations and warranties generally; specific representations and warranties are often carved out from these periods.

Indemnification >

0%

0%

1%

35%

11%

40%

0%

11%

2%

Silent

Express No Survival

<12 months

12 months

>12 to <18 months

18 months

>18 to <24 months

24 months

>24 months





Escrows/Holdbacks as % of Transaction Value* (SRS/ABA Comparison)

(Subset: deals with determinable escrows/holdbacks)

Indemnification >

2%

0%

14%

25%

40%

15%

2%

2%

16%

10%

27%

16%

16%

9%

1%

0%

Up to 5%

>5% to 7%

>7% to <10%

10%

>10% to 15%

>15% to 20%

>20% to 25%

>25%

SRS

ABA

* 82% of SRS deals with escrows/holdbacks had a cap equal to the amount of the escrow/holdback; 50% of ABA deals had the same.





About SRS|Shareholder Representative Services

SRS is the leading expert in professionally managing the post-closing process to safeguard selling shareholders' interests in M&A transactions. On deals valued in aggregate in excess of $10 billion, SRS has represented more than 400 VC and private equity firms and over 10,000 shareholders. We have more knowledge and experience in serving as a shareholder representative than anyone else.

Professional As shareholder representative, SRS professionally manages the entire post-closing process, including the management of escrows, earn-out negotiations, the handling of claims, disputes and litigation, communications with the acquirer and, ultimately, distribution of escrow funds.

Independent By engaging SRS, there are no conflicts of interests. With state-of-the-art monitoring and communications systems, shareholders have ready access to all relevant information with full knowledge their interests are being protected.

Experienced The professionals at SRS are lawyers, accountants, bankers and entrepreneurs whose sole focus is shareholder representation. Our experience allows us to quickly slip into deals, even at the final hour. Our expertise allows us to deliver on our customer promise – to simplify the post-closing process and maximize the timely return of sale proceeds to shareholders.

For more information visit: www.shareholderrep.com GO TO www.shareholderrep.com/study for the full 2010 SRS M&A Deal Terms Study


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