Key Takeaways From The ABA US Private M&A Deal Points Study

The M&A Market Trends Subcommittee of the ABA's Business Law Section recently released its US Private Target M&A Deal Points study which analyzed publicly available acquisition agreements which were signed or completed in 2020 and Q1 2021 in the US. The sampling covered 123 deals with transaction values ranging from $30M to $750M, with the top 3 industries being health care, technology and industrial goods & services. Key findings of the study are as follows:

• Tempered Use of Earnouts? Perhaps surprisingly given the ongoing pandemic and challenges associated with valuations during such unprecedented times, only 20% of deals in 2020 and 2021 contained earnout clauses (compared to 27% in 2018-2019 period), with the most popular benchmark used to calculate the earnout being revenue. The revenue benchmark increased significantly from previous years and was notably ahead of any other measuring stick. The EBITDA benchmark correspondingly decreased in popularity in 2020