M&A Report

2024

Attorney Advertising
2024 M&A Report – What’s Inside

2 Market Review and Outlook

5 Beyond the “Just Say No” Defense

Updated Data on Common Takeover Defenses Available to a Public Company

8 Selected WilmerHale M&A Transactions

10 Key Developments in a Rapidly Evolving US Antitrust Enforcement

Environment
Important Considerations for Getting Your Deal Done

12 DOJ M&A Safe Harbor Policy

A Brief Overview of the Recently Announced Policy

13 A Comparison of Deal Terms in Public and Private Acquisitions

Updated Data Highlights Recent Trends in Company Sale Terms

16 Trends in VC-Backed Company M&A Deal Terms

2 Market Review and Outlook

W hile the 2022 M&A market was

buoyed by deal carryover from 2021
and more conducive market conditions
Global M&A Activity – 2005 to 2023
# of deals Deal value (in $ billions)

4,659
in the first half of the year, the 2023 M&A 57,133
59,895
56,486 57,408

market felt the impact of the Federal 3,804

47,120
51,888 52,883 52,385 4,049 52,761
50,981
49,126 49,992
46,855 3,578 45,757
Reserve’s most aggressive interest rate 41,406
3,482
41,738
3,386 3,394 3,338
39,774
3,158
3,005
hikes in more than 25 years. In addition to 2,466
35,985
2,651
2,975
2,501 2,549
rising interest rates, uncertainty regarding 30,976 2,339 2,352 2,342

the trajectory of the economy, regulatory 1,808

headwinds, and geopolitical tensions all

weighed on the M&A market in 2023.

The number of reported M&A transactions

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
worldwide decreased by 20%, from 49,992
deals in 2022 to 39,774 in 2023. Global Source: S&P Global Market Intelligence
reported M&A deal value contracted
22%, from $3.0 trillion to $2.34 trillion.
Average deal size was $58.9 million in US M&A Activity – 2005 to 2023
2023, down 2% from $60.1 million in 2022. # of deals Deal value (in $ billions)

25,024
23,651 24,049 3,067
GEOGRAPHIC RESULTS 21,838
20,790 21,021 20,902 21,338
2,497 19,681 20,074
Deal volume and value were down across 18,882
2,172 2,186
18,127
15,910 16,537 2,086 2,123 16,147
all major geographic regions in 2023. 14,757
1,812 1,830 1,940
13,595 1,745 1,761
12,592
11,865 1,498
– United States: Deal volume declined
1,488
1,358 1,384 1,367
1,188
1,090
by 24%, from 21,338 transactions in 851
2022 to 16,147 in 2023. US deal value
fell by 15%, from $1.76 trillion to $1.50
trillion. Average deal size increased
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
by 12%, from $82.5 million to $92.8
million. The number of billion-dollar Source: S&P Global Market Intelligence
transactions involving US companies fell
by 8%, from 286 in 2022 to 262 in 2023,
while their total value decreased by 7%, European M&A Activity – 2005 to 2023
from $1.22 trillion to $1.14 trillion. # of deals Deal value (in $ billions)
22,650 2,110 22,273 22,360 22,127
21,562
– Europe: The number of transactions in
21,537 21,429
20,267 20,344 20,671 20,240
19,530 19,951
19,043 19,226
Europe declined by 24%, from 19,226 in 1,699
16,945
1,688
16,463 1,549 1,544
2022 to 14,616 in 2023. Total deal value 1,392 14,616
13,052 1,322
dropped by 20%, from $1.02 trillion 1,174 1,210
1,150 1,146 1,186 1,162
1,059 1,104
to $810.7 billion, although average 937
1,017
811
deal size increased by 5%, from $52.9 749

million to $55.5 million. The number

of billion-dollar transactions involving
European companies contracted by
10%, from 188 in 2022 to 170 in 2023, 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

while their total value declined by 15%, Source: S&P Global Market Intelligence
from $637.7 billion to $538.9 billion.

– Asia-Pacific: In the Asia-Pacific region, 27%, from $81.2 million to $59.0 million. SECTOR RESULTS
deal volume dipped by 6%, from 10,931
The number of billion-dollar transactions
transactions in 2022 to 10,277 in 2023. M&A transaction volume decreased
involving Asia-Pacific companies declined
Total deal value in the region shrank by across all primary industry sectors in
by 26%, from 144 in 2022 to 106 in 2023,
32%, from $887.7 billion to $606.7 billion, 2023 while deal value trends were varied.
while their total value contracted by 38%,
resulting in an average deal size that fell
from $526.3 billion to $325.2 billion.
– Technology: Global transaction volume in
the technology sector decreased by 19%,
3 Market Review and Outlook

from 8,902 deals in 2022 to 7,174 deals Asia-Pacific M&A Activity – 2005 to 2023
in 2023. Global deal value slumped by # of deals Deal value (in $ billions)
45%, from $558.6 billion to $307.6 billion.
14,892
Average deal size slid 32%, from $62.8 14,119
1,265
13,972
million to $42.9 million. US technology 12,293
1,117 12,691 12,482 1,111
11,586 11,335 11,521
deal volume decreased by 21%, from 10,516 923 910 10,156
10,968 10,931
10,277
884 884 888
9,739
3,799 to 3,000 transactions, while total 8,832 8,789 737
699 731
7,927
US technology deal value fell 58%, from 6,849
656 659 641
607
566 559
$444.3 billion to $187.0 billion, resulting 497

in a 47% decrease in average deal size, 370

from $117.0 million to $62.3 million.

– Life Sciences: Global transaction volume 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
in the life sciences sector decreased
by 15%, from 1,432 deals in 2022 to Source: S&P Global Market Intelligence
1,222 deals in 2023, while global deal
value jumped 44%, from $171.9 billion
to $247.5 billion. Average deal size Technology M&A Activity – 2005 to 2023
increased by 69%, from $120.1 million # of deals Deal value (in $ billions)
to $202.5 million. In the United States, 10,096

deal volume declined by 20%, from 677

8,902

704 to 566 transactions, while deal 7,503 7,555 7,749

7,469 7,517 559
7,344 7,174
7,075
value increased by 37%, from $152.8 6,734 498
6,148 6,246 6,140 6,054 453
billion to $208.7 billion, resulting in a 5,878 5,730 418 414
5,154
70% increase in average deal size, from 4,615 341
308
284 271 288
$217.1 million to $368.7 million. 231
256
208
190 180 180
158 166
– Financial Services: Global M&A activity
in the financial services sector decreased
by 21%, from 2,722 deals in 2022 to 2,137 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
deals in 2023. Global deal value was down
50%, from $330.9 billion to $165.1 billion, Source: S&P Global Market Intelligence

resulting in a 36% decrease in average

deal size, from $121.6 million to $77.3 Life Sciences M&A Activity – 2005 to 2023
million. In the United States, financial # of deals Deal value (in $ billions)
services sector deal volume contracted 1,891
420
by 22%, from 1,407 to 1,097 transactions,
1,626
while total deal value dropped 14%, 1,582 1,557
1,432
1,380
from $84.7 billion to $72.5 billion. 1,279
302 1,365
285
1,320
273 1,222
Average US deal size increased by 10%, 1,079 1,079
1,031
1,086 1,065 1,032
1,104 254 252 247

from $60.2 million to $66.1 million. 872 910 201 201

172
149 153 150
– Telecommunications: Global transaction 132
119 127
138

89
volume in the telecommunications sector 72

fell by 18%, from 663 deals in 2022 to

546 deals in 2023. Deal value increased
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
by 20%, from $79.2 billion to $95.2
billion, resulting in a 46% increase in Source: S&P Global Market Intelligence
average deal size, from $119.5 million to
$174.4 million. US telecommunications Important factors that will affect M&A
OUTLOOK
deal volume decreased 21%, from 204 activity over the coming year include:
to 161 transactions, while deal value Given the challenging conditions of
almost tripled from $21.8 billion 2023, the decline in M&A activity is – Macroeconomic Conditions: Global GDP
to $64.1 billion. The average US unsurprising, but the year ended on a growth slowed from 6.0% in 2021—the
telecommunications deal size jumped somewhat positive note, as total deal value strongest growth rate in almost 50
from $106.8 million to $397.9 million. in the fourth quarter of 2023 was the years—to 3.5% in 2022 and 3.1% in
highest since the second quarter of 2022. 2023. Following growth of 5.9% in 2021
4 Market Review and Outlook

and 2.1% in 2022, US GDP growth was Financial Services M&A Activity – 2005 to 2023
expected to slow further in 2023, but the # of deals Deal value (in $ billions)
economy showed remarkable resilience 3,321 763
with 2023 US GDP growth coming in at 2,980 3,059 3,094 3,109 3,100
3,191
3,100 3,102
2,947 2,941 2,887
2.4%. Despite the Federal Reserve having 596
2,769
2,590
2,737
2,587
2,722

raised interest rates 11 times since the 2,222 518

2,137
start of 2022 to their highest levels in 22
416
years, higher borrowing costs have yet to 340
365
387 389
334 320 331
312
tamp down consumer spending; inflation 283 276
301
280 284
246
appears to have moderated, resulting 165
in hopes that the Federal Reserve will
cut interest rates in 2024; and there is
growing optimism of avoiding a recession 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
and achieving a “soft landing.” Higher
interest rates have, however, led to tighter Source: S&P Global Market Intelligence

lending conditions and increased the

cost of debt-financed acquisitions.
Telecommunications M&A Activity – 2005 to 2023
– Valuations: Rising interest rates have # of deals Deal value (in $ billions)
pressured company valuations. Certain
sectors, such as technology, accustomed to 1,200 1,219
289
low interest rates to fuel their growth have 1,092 276 268 263
973 247 249
seen dramatic declines while other sectors 883 864 844 216 818
have seen a more moderate retrenchment. 205
186
768
723 748
716 747 744 186 754
179 173 681
From an acquirer’s standpoint, depressed 661 663
145 546
valuations create attractive buying 128

opportunities to improve their market 91

82 88
79
95

position. For VC-backed companies

that are seeking exits, they face the
conundrum of selling in the trough of the
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
market or the prospect of a down round
if a new capital infusion is required. The Source: S&P Global Market Intelligence
net effect of these competing tensions on
M&A deal flow in 2024 is hard to discern.
increased levels of equity investment in process. Many VC-backed companies
– Regulatory Environment: In light of
acquisitions and higher borrowing costs. that last raised money as valuations
heightened national security concerns,
peaked in 2021 are likely to now be below
as well as an aggressive US antitrust – Strategic Buyers: Challenging that valuation. In the coming year, the
enforcement environment, parties can macroeconomic fundamentals and
volume of VC-backed company sales will
expect that transactions involving foreign decelerating global GDP growth concerns
depend in part on whether founders and
buyers or raising antitrust concerns will are likely to prompt business leaders to
investors expect valuations to become
be subject to intense regulatory scrutiny, reassess their plans. Strategic acquisitions
more favorable, and on factors such
leading to longer closing timelines remain a compelling way to transform
as the availability of capital for those
and greater closing risk, all of which businesses and fuel growth and are likely
companies that seek to stay private and
may continue to chill deal activity. to continue to play an important role in
market receptivity to VC-backed IPOs.
the M&A market in the coming year.
– Private Equity Activity: On the buy side,
– SPAC Mergers: Regulatory scrutiny
private equity firms, which were buoyed – VC-Backed Exits: The number of (including in the wake of final rules
by the $556.1 billion in global fundraising reported US acquisitions of VC-backed
adopted by the US Securities and
in 2023—just above the $548.8 billion companies decreased by 26%, from 1,285
Exchange Commission in January
in 2022 and the third-highest annual in 2022 to 953 in 2023, while reported
2024) and poor returns for SPACs that
figure in history—continue to hold proceeds declined 15%, from $65.18
have completed business combinations
record levels of “dry powder.” On the billion to $55.13 billion—the lowest
continue to weigh heavily on the SPAC
sell side, PE firms face pressure both to deal value since the $52.57 billion in
market. In 2023, there were only 98
exit investments and return capital to 2018. VC-backed companies and their
mergers involving SPACs, compared
investors, and to deploy newly committed investors often prefer the relative ease
to 100 in 2022 and 199 in 2021, and it
capital, even if returns are dampened by and certainty of a company acquisition
seems likely this trend will continue. <
to the lengthier and more uncertain IPO
 Beyond the “Just Say No” Defense
5 Updated Data on Common Takeover Defenses Available to a Public Company

E stablished public companies typically

maintain at least some takeover
defenses, although the prevalence of
are taken only when it is the clear will of
the stockholders. By contrast, proponents
of a majority-vote standard believe it
entrenchment devices used to block
initiatives that are supported by holders
of a majority of the company’s stock but
several defenses previously considered makes the company more accountable opposed by management and the board. In
to be standard has declined over the to stockholders and that improved practice, supermajority requirements can
past decade in response to pressure accountability leads to better company be almost impossible to satisfy, especially
from institutional investors. performance. Supermajority requirements for a company with a meaningful number
are also viewed by their detractors as of noninstitutional stockholders.
Despite the decline in takeover defenses
among established public companies, most
IPO companies continue to implement TRENDS IN TAKEOVER DEFENSES AMONG IPO COMPANIES
anti-takeover provisions (understanding 2009– 2011–
2006– 2014– 2009– 2011–
2006– 2014–
that such measures may in the future 2013 2015
2010 2018 2019
2016 2020
2017 2021
2018 2022
2019 2023
2020 2013 2015
2010 2018 2019
2016 2020
2017 2021
2018 2022
2019 2023
2020

need to be dismantled). In 2022 and

85%
2023, however, adoption rates by IPO 84% 86% 84% 84%
81%
81% 83% 72%
companies for many takeover defenses 78%

declined markedly from historical

54%
norms, likely due at least in part to 44%
the unusual characteristics of the IPO 46%

market during this period—deal flow 44% Supermajority voting requirements to approve
Classified board mergers or change corporate charter and bylaws
was significantly depressed, offering
sizes were much smaller and IPO
95%
companies had far less annual revenue. 88% 89% 88% 90%
99%
94% 95% 95% 95%
Common takeover defenses include:
81%
76%
CLASSIFIED BOARDS 46%
52%
Supporters of classified boards—in Prohibition of stockholders’ Limitation of stockholders’
which directors serve staggered three- right to act by written consent right to call special meetings
year terms—believe that this structure
enhances the knowledge, experience and
expertise of boards by helping ensure
92%
that, at any given time, a majority of
96% 96% 96% 99% 79% 78% 78%
the directors will have experience and 95% 73% 73% 72%
familiarity with the company’s business. 80% 81%

These supporters believe classified boards

Section 203 of the Delaware
promote continuity and stability, which
Advance notice requirements corporation statute (not opt out)*
in turn allow companies to focus on
long-term strategic planning, ultimately
leading to a better competitive position and 100% 100% 100% 100% 100%
99% 99%
maximizing stockholder value. Opponents
of classified boards argue that annual 17%
22%
11% 12% 13%
elections for all directors increase director 8% 8%

accountability to stockholders, which

in turn improves director performance,
and that classified boards entrench Blank check preferred stock Multi-class capital structure
directors, foster insularity and impede
97%
efforts to expand board diversity. 96% 99% 99%
92% 92%
81% 77%
69%
SUPERMAJORITY VOTING
REQUIREMENTS
Advocates for supermajority vote 40%
requirements to approve mergers or amend Exclusive forum provisions— Exclusive forum provisions—
the corporate charter or bylaws claim internal corporate claims* Securities Act claims*†
that these provisions help preserve and
*Delaware corporations only
maximize the value of the company by †2021–2023 only
ensuring that important corporate actions Source: WilmerHale analysis of SEC filings from 2009 to 2023 for US issuers
 Beyond the “Just Say No” Defense
6 Updated Data on Common Takeover Defenses Available to a Public Company

PROHIBITION OF STOCKHOLDERS’ PREVALENCE OF TAKEOVER DEFENSES

RIGHT TO ACT BY WRITTEN CONSENT ESTABLISHED PUBLIC COMPANIES,
IPO COMPANIES, YEAR-END 2023
Written consents of stockholders 2019–2023
S&P 500 RUSSELL 3000
can be an efficient means to obtain
Classified board 78% 11% 43%
stockholder approvals but can result in
a single stockholder or a small number Supermajority voting requirements to 17% to 33%, 15% to 53%,
of stockholders being able to take action approve mergers or change corporate 77% depending on type depending on type
without prior notice or any opportunity charter and bylaws of action of action
for other stockholders to be heard. If Prohibition of stockholders’ right to act by
84% 68% 73%
written consent
stockholders are not permitted to act by
written consent, all stockholder action Limitation of stockholders’ right to call
93% 30% 51%
special meetings
must be taken at a duly called stockholders’
meeting for which stockholders have Advance notice requirements 94% 99% 96%
been provided information about
Section 203 of the Delaware corporation
the matters to be voted on and given 76% 89% N/A
statute (not opt out)*
an opportunity to ask questions.
Blank check preferred stock 100% 95% 96%

LIMITATION OF STOCKHOLDERS’
Multi-class capital structure 17% 7% 11%
RIGHT TO CALL SPECIAL MEETINGS
Exclusive forum provisions—
98%* 56%** 64%**
If stockholders have the right to call special internal corporate claims
meetings of stockholders—rather than Exclusive forum provisions—
92%* N/A N/A
waiting until the next annual meeting Securities Act claims†
to propose matters for stockholder
*Delaware corporations only
action—one or a few stockholders may **Not limited to Delaware corporations
be able to call a special meeting, which †2021–2023 only
can result in abrupt changes in board Source: IPO company data is based on WilmerHale analysis of SEC filings from 2019 to 2023 for US issuers.
Established public company data is from FactSet’s SharkRepellent database at year-end 2023.
composition, interfere with the board’s
ability to maximize stockholder value,
or result in significant expense and ADVANCE NOTICE REQUIREMENTS SECTION 203 OF THE DELAWARE
disruption. A requirement that only the CORPORATION STATUTE
board or specified officers or directors Advance notice requirements provide that
are authorized to call special meetings of at a stockholders’ meeting stockholders Unless it opts out of Section 203, a public
stockholders could, however, have the effect may only consider and act upon director company incorporated in Delaware
of delaying until the next annual meeting nominations or other proposals that have is limited in its ability to engage in
actions that are favored by the holders been specified in the meeting notice and a “business combination” with any
of a majority of the company’s stock. brought before the meeting by or at the “interested stockholder” for three years
direction of the board, or by a stockholder following the time that the person
who has delivered timely written notice to became an interested stockholder without
the company. Advance notice requirements board approval. In general, an interested
REASONS TO ADOPT
TAKEOVER DEFENSES afford the board ample time to consider stockholder is any stockholder that,
the desirability of stockholder proposals, together with its affiliates, beneficially
Companies adopt takeover defenses to help: ensure that they are consistent with the owns 15% or more of the company’s
– ensure stability and continuity in decision- company’s objectives and, in the case of stock. A public company incorporated
making and leadership that will enable the director nominations, provide important in Delaware is automatically subject
company to focus on long-term value creation; information about the experience and to Section 203 unless it opts out in its
– provide the board with adequate time to suitability of board candidates. These original corporate charter or pursuant
evaluate and react in an informed manner provisions could also have the effect to a subsequent charter or bylaw
to unsolicited acquisition proposals; of delaying until the next stockholder amendment approved by stockholders.
meeting actions that are favored by the Remaining subject to Section 203 helps
– provide negotiating leverage
for the board; and holders of a majority of the company’s eliminate the ability of an insurgent
stock. Investors generally do not object to to accumulate and/or exercise control
– maximize overall stockholder value by advance notice requirements as long as the without paying a control premium
providing economic disincentives against
inadequate, unfair or coercive bids.
advance notice period is not unduly long. but could prevent stockholders from
accepting an attractive acquisition offer
that is opposed by an entrenched board.
 Beyond the “Just Say No” Defense
7 Updated Data on Common Takeover Defenses Available to a Public Company

DIFFERENCES IN ANTI-TAKEOVER PRACTICES AMONG TYPES OF IPO COMPANIES by stockholders against the company.
Proponents of these provisions are
ALL IPO VC-BACKED PE-BACKED OTHER IPO motivated by a desire to adjudicate such
COMPANIES COMPANIES COMPANIES COMPANIES
claims in a single jurisdiction that has a
Classified board 78% 88% 88% 39%
well-developed and predictable body of
corporate case law and an experienced
Supermajority voting requirements to judiciary. Opponents argue that these
approve mergers or change corporate 77% 88% 84% 37%
provisions—which have been expressly
charter and bylaws
authorized by the Delaware corporation
Prohibition of stockholders’ right to act by
written consent
84% 92% 96% 48% statute since 2015—deny aggrieved
stockholders the ability to bring litigation
Limitation of stockholders’ right to call
93% 98% 99% 76% in a court or jurisdiction of their choosing.
special meetings

Advance notice requirements 94% 97% 99% 79%

EXCLUSIVE FORUM PROVISIONS
Section 203 of the Delaware corporation FOR SECURITIES ACT CLAIMS
76% 94% 32% 71%
statute (not opt out)*
Prior to 2020, in response to the growing
Blank check preferred stock 100% 100% 100% 99%
trend of plaintiffs bringing federal
securities law class-action lawsuits in
Multi-class capital structure 17% 16% 20% 16%
state courts, a handful of IPO companies
Exclusive forum provisions—internal incorporated in Delaware adopted
98% 99% 100% 90%
corporate claims* “federal forum” provisions requiring
Exclusive forum provisions— stockholders to sue in federal court, rather
92% 95% 100% 68%
Securities Act claims*† than state court, over alleged violations
*Delaware corporations only of the Securities Act of 1933. Adoption
†2021–2023 only of federal forum provisions has soared
Source: WilmerHale analysis of SEC filings from 2019 to 2023 for US issuers on the heels of a 2020 Delaware Supreme
Court decision confirming the validity of
the technique. Federal forum provisions
BLANK CHECK PREFERRED STOCK founders or other pre-IPO stockholders
are intended to help a company avoid
hold shares of common stock that are
When blank check preferred stock is duplicative litigation filings and steer
entitled to multiple votes per share,
authorized, the board has the right to cases to federal courts more accustomed
while the public is issued a separate
issue preferred stock in one or more series to hearing federal securities claims, while
class of common stock that is entitled
without stockholder approval under opponents argue that the provisions
to only one vote per share or no voting
state corporate law (but subject to stock prevent stockholders from seeking
rights at all. Use of a multi-class capital
exchange rules) and has the discretion recourse in state courts they may view
structure can enable the holders of the
to determine the voting, dividend, as more receptive to their claims. <
high-vote stock to retain voting control
conversion and redemption rights and of the company and to pursue strategies
liquidation preferences of each such to maximize long-term stockholder
series. The availability of blank check value. Critics believe that a multi-class STOCKHOLDER RIGHTS PLANS
preferred stock can eliminate delays structure entrenches the holders of the A traditional stockholder rights plan (sometimes
associated with a stockholder vote on high-vote stock, insulating them from referred to as a “poison pill”) is a defensive
specific issuances, thereby facilitating takeover attempts and the will of public measure designed to deter any acquisition
financings and strategic alliances. The of shares exceeding a specified ownership
stockholders, and that the mismatch
board’s ability, without further stockholder threshold without board approval. The rights
between voting power and economic plan gives all stockholders (other than a
action, to issue preferred stock or rights interest may increase the possibility stockholder acquiring shares of common stock in
to purchase preferred stock can also that the holders of the high-vote stock excess of the specified threshold) a contractual
be used as an anti-takeover device. will pursue a riskier business strategy. right to purchase additional securities of the
company at a substantial discount, thereby
significantly diluting the acquiring stockholder’s
MULTI-CLASS CAPITAL STRUCTURES EXCLUSIVE FORUM PROVISIONS economic and voting power. When combined
FOR INTERNAL CORPORATE CLAIMS with a classified board, a rights plan makes
While the majority of companies go
an unfriendly takeover particularly difficult.
public with a single class of common Exclusive forum provisions stipulate Poison pills are almost unheard of among
stock that provides the same voting and that the Court of Chancery of the State US IPO companies and are quite uncommon
economic rights to every stockholder, some among established public companies.
of Delaware is the exclusive forum in
companies employ a multi-class capital which internal corporate claims arising
structure under which the company’s under Delaware state law may be brought
Counsel of Choice for Mergers and Acquisitions
Serving market leaders in life sciences, technology, financial services/FinTech and many other sectors

Acquisition of Acquisition by
Acquisition of Combination with Acquisition of Livongo by Acquisition by Acquisition by Acquisition by Acquisition by Thoma Bravo
Atotech
GFL Environmental TLGY Acquisition Corporation Teladoc Health Morgan Stanley Cisco Systems Clearlake Capital Group Veritas Capital
$4,400,000,000 $2,600,000,000
$525,000,000 $365,000,000 $18,500,000,000 $7,000,000,000 $4,500,000,000 (financing counsel) $3,000,000,000 $2,800,000,000 (co-counsel)
June 2023 June 2023 October 2020 March 2021 March 2021 August 2022 February 2021 April 2022 May 2022

Sale of Applied, Food and Acquisition by Acquisition by Acquisition by

Enterprise Services businesses to Acquisition of Acquisition of Acquisition of Acquisition of
Regeneron Novo Nordisk Bain Capital and Abu Dhabi
New Mountain Capital Payzer VettaFi Investment Authority Galileo Financial Technologies ServiceChannel
$213,000,000 $1,350,000,000
$2,450,000,000 (including contingent payments) $250,000,000 $848,000,000 (counsel to special committee) Undisclosed $1,200,000,000 $1,200,000,000
March 2023 September 2023 November 2023 January 2024 December 2020 October 2022 May 2020 August 2021

Sale of anatomical pathology Acquisition by Acquisition by Merger with Nanometrics to form Acquisition by
business to Acquisition of Acquisition by Acquisition of Acquisition of
Vertex Pharmaceuticals Organon Onto Innovation Victoria’s Secret
PHC Holdings Paramit Rakuten Linode Spruce Power
$1,000,000,000 $954,000,000 $1,400,000,000 $700,000,000
$1,140,000,000 (including contingent payments) $1,000,000,000 $1,000,000,000 (including contingent payments) $900,000,000 (enterprise value) (including post-closing payments) $600,000,000
June 2019 July 2019 August 2021 August 2021 December 2021 March 2022 October 2019 December 2022 September 2022

Combination with
Sale of Red Lion Controls to
Acquisition by Acquisition by Acquisition by Informa Tech’s Digital Businesses
Acquisition by HMS Networks Combination with Acquisition of
LG Chem Sanofi Eli Lilly Up to $1,200,000,000
Wonder Group $345,000,000 Jasper Therapeutics Finxera Holdings (transaction value before synergies)
$566,000,000 $470,000,000 $610,000,000
$103,000,000 (implied equity value) Pending $475,000,000 (including contingent payments) (including contingent payments) $407,000,000 Pending
November 2023 January 2023 (as of March 20, 2024) September 2021 April 2021 December 2022 March 2021 (as of March 20, 2024)
 Key Developments in a Rapidly Evolving US Antitrust Enforcement Environment
10 Important Considerations for Getting Your Deal Done

U nder the Biden Administration,

M&A has faced increased antitrust
scrutiny. The Federal Trade Commission
rationale—and (2) substantially expand
the existing document submission
requirements. Currently, parties need
enforcement practices the agencies use to
investigate mergers. The agencies issued the
Guidelines after a nearly two-year process,
(FTC) and the Department of Justice only provide final versions of “Item 4(c) and they make significant changes from
Antitrust Division (DOJ) have been vocal and 4(d)” documents—i.e., documents the prior guidelines. Key changes include:
about their desire to ramp up antitrust prepared by or for an officer or director
enforcement and eager to challenge M&A that analyze the transaction with respect – Market Concentration: The Guidelines
adopt significantly lower market
transactions in court. Statistically, only to competition, markets or synergies.
concentration thresholds at which
a small number of deals face antitrust The proposed changes would sweep in
mergers are presumed to harm
headwinds: less than 2% of reported documents that parties ordinarily would
competition. For example, a market
transactions are the subject of a “second not provide absent a specific agency consisting of five companies each
request,” and the balance receive little to request for those documents, including with a 20% market share is “highly
no antitrust scrutiny. Nevertheless, parties certain draft 4(c) documents or documents concentrated,” where previously it would
to M&A transactions are well-advised prepared by or for “supervisory deal team be only “moderately concentrated.”
to take seriously the antitrust agencies’ lead(s)” with 4(c) content. Certain ordinary- The Guidelines also introduce a new
aggressive stance. The agencies continue course strategic documents (e.g., business presumption of competitive harm if
to enforce aggressively when they believe plans) also would be required. The proposal the merged firm would have more than
a transaction raises anticompetitive would also require significantly expanded a 30% market share and the merger
concerns, including based on novel disclosures of other information, such as increases the Herfindahl-Hirschman
theories and despite mixed results in court. prior acquisitions and minority stakes. Index (HHI) by more than 100.

Three recent developments merit particular If the proposed revisions are adopted— – Vertical Mergers: The Guidelines for the
attention because they change decades- and we expect the proposal will remain first time address in the same document
old policies and create new challenges largely intact—HSR notifications will both “horizontal” transactions (M&A
for M&A: (1) the proposed new HSR be much more burdensome and require among competitors) and “vertical”
notification form, which will significantly substantially more preparation time and transactions (where one party makes
expand the burden of preparing HSR consideration. That will materially expand an input that can be used in the other
filings; (2) the new Merger Guidelines, the time to closing and transaction costs party’s product). The Guidelines reflect
which reflect the aggressive approach for many transactions. Additionally, the the agencies’ aggressive approach to
vertical deals. They articulate potential
the agencies have been taking to merger parties will need to take at the time of
harms from a merger that combines firms
analysis; and (3) the emergence of the “fix- notification critically important positions
in a vertical relationship. Those include,
it-first” strategy in light of the agencies’ regarding overlaps and non-horizontal
among other things, the merged firm:
reluctance to resolve competitive concerns relationships, which will frame any
(1) withholding critical inputs from or
through negotiated consent decrees that subsequent investigation or litigation and
disfavoring downstream competitors;
provide for divestitures or other remedies. potentially have implications for reviews (2) foreclosing sales opportunities
of future transactions. The expanded from upstream competitors; and
PROPOSED HSR NOTIFICATION document submissions will require that (3) gaining increased visibility into
FORM CHANGES businesses be even more vigilant to avoid competitors’ sensitive information.
creating vague, incomplete or otherwise
In June 2023, for the first time in misleading documents that could trigger – Potential Competition: The Guidelines
45 years, FTC and DOJ proposed a an extended investigation. It will be express a preference for “making”
fundamental overhaul of the HSR even more crucial for companies to have versus “buying,” claiming that “[i]n
pre-merger notification form. The robust training and monitoring programs general, expansion into a concentrated
HSR form historically has been for both deal-related and high-level market via internal growth rather than
straightforward, calling for relatively via acquisition benefits competition.”
ordinary-course document creation.
little information but requiring an often- Accordingly, the Guidelines devote
substantial document submission. The proposed HSR form likely will not substantial attention to the elimination
become effective until the second quarter of potential competition, including both
The proposed new form would of 2024, but companies must assume that “actual potential competition” (where one
simultaneously (1) move HSR notifications transactions under current consideration of the merging parties has set plans to
closer towards other jurisdictions’ will be notified under the new HSR form. enter a market) and “perceived potential
notification regimes (such as those of the competition” (where current competitors
European Union or China) by requiring for are disciplined by a perception that
NEW MERGER GUIDELINES
the first time detailed narratives regarding one or more merging parties might
key aspects of the substantive antitrust In December 2023, FTC and DOJ jointly enter). Potential competition will
assessment—including horizontal overlaps, released their final Merger Guidelines, likely continue to receive substantial
vertical relationships and strategic deal which summarize the procedures and attention in merger reviews, given
 Key Developments in a Rapidly Evolving US Antitrust Enforcement Environment
11 Important Considerations for Getting Your Deal Done

how frequently acquirers with internal into a related market by, for example, review landscape for transactions that
R&D capabilities contemplate “make or tying or bundling sales of two products. may raise antitrust concerns, leading
buy” decisions in the M&A context. parties increasingly to contemplate “fix-
– Serial Acquisitions. The Guidelines state it-first” strategies. With fix-it-first, the
– Dominant Firms. The Guidelines that a firm may violate antitrust law
parties modify the transaction to address
emphasize that “mergers can violate through a series of acquisitions of smaller
the law when they entrench or extend a firms in the same or related sectors. It
antitrust concerns, typically by entering
dominant position” but do not explain is unclear whether this means that the an agreement with a third party to sell
what “dominant position” means in the agencies might challenge a series of divested assets, without entering a consent
merger review context. Additionally, acquisitions as cumulatively unlawful decree with the agency. The agency can
the Guidelines discuss a potential even if no individual acquisition on then either clear the transaction based
“conglomerate” concern that a merger its own would be anticompetitive. on the proffered remedy or litigate over
could enable the merged firm to extend the remedy’s adequacy and sometimes
a dominant position from one market – Partial Ownership and Minority over whether the transaction may
Investments. The Guidelines articulate lessen competition in the first place.
ways in which acquisitions of partial
A MIXED RECORD IN COURT ownership and minority investments Where there is a remedy that is workable
could harm competition. as a business matter and consistent with
FTC and DOJ already have been pushing the
deal objectives, a well-considered fix-it-
envelope and pursuing merger challenges based The new Merger Guidelines largely reflect
on less traditional theories than are reflected first remedy can bring several potential
the agencies’ current approaches to merger
in the final Merger Guidelines priorities. But benefits, including (1) decreasing the
the agencies’ record in court has been mixed.
reviews. It is less clear, however, whether
likelihood of prolonged antitrust litigation;
courts will follow this guidance. Agency
– Potential Competition. The perceived (2) providing upfront certainty regarding
guidelines are not legally binding, and
potential competition theory was at the the scope of the divestiture; (3) avoiding
courts have generally followed them only
heart of the FTC’s unsuccessful challenge the compliance burdens of an agency
of Meta’s acquisition of the virtual reality insofar as they find them persuasive.
consent decree; and (4) in some cases,
company Within. The FTC recently relied Unlike previous merger guidelines, the
avoiding a fire sale at depressed prices at
on the actual potential competition theory new Guidelines do not reflect bipartisan
to challenge Sanofi’s proposed exclusive
the end of the merger review process.
consensus. There are also questions about
license to Maze Therapeutics Inc.’s therapy
whether the Guidelines would survive a A fix-it-first strategy can be difficult
for treatment of Pompe disease, which the
FTC alleged would have eliminated a nascent change to a Republican administration, to execute, however. Among other
competitor. The parties abandoned the which could result in very different things, parties should carefully assess
transaction a few days after the FTC sued. approaches to merger enforcement. how a potential remedy may affect deal
– Vertical. The agencies have lost two objectives and practical challenges for
recent vertical cases in court: Microsoft’s EMERGENCE OF THE “FIX- a potential divestiture or other remedy.
acquisition of Activision and UnitedHealth’s IT-FIRST" STRATEGY Those challenges will often include
acquisition of Change Healthcare. But they (1) finding a way to extract selected
have successfully blocked, or caused the Until recently, the US antitrust agencies assets from the rest of a merging
termination of, other recent vertical deals, commonly resolved competitive concerns
notably Lockheed’s proposed acquisition
party’s business and (2) identifying
regarding proposed mergers by entering potential buyers capable of competing
of Aerojet, Nvidia’s proposed acquisition
of Arm and Illumina’s acquisition of Grail. a consent decree with the merging parties effectively with the divested assets.
that included remedies. The merging
– Conglomerate concerns. In an especially parties might sell off overlapping assets If the parties decide to employ a fix-it-first
aggressive move, the FTC in May 2023 sought strategy, timing considerations will be
to block Amgen’s acquisition of Horizon
to address agency concerns, but the
Therapeutics based on a “conglomerate” transaction would be allowed to proceed. critical. They will almost invariably face
concern that Amgen could use its large DOJ and FTC, however, have made clear difficult decisions regarding the balance
drug portfolio to offer bundled discounts that they will sharply limit resolutions between seeking to persuade the agency—
or rebates contingent on the customer through consent decrees with remedies, or ultimately a court—that the transaction
buying one or both of Horizon’s drugs, which will not harm competition and beginning
were alleged to hold monopoly positions,
preferring to challenge transactions
thereby excluding competition from incipient outright. Since 2022, DOJ has agreed to the divestiture sales process to minimize
competitors to Horizon’s drugs. This was the resolve a merger case through a consent closing delays or the risk of going past the
first time in over 40 years that a US antitrust decree only once. The FTC has approved transaction’s end date. The parties should
agency challenged a transaction based consent decrees with remedies to resolve ensure that the regulatory provisions in
on a conglomerate theory of competitive the applicable transaction documents
harm. The parties ultimately settled through
merger cases since 2022, but it also is
a consent decree, with Amgen agreeing articulating a more restrictive approach. faithfully reflect the parties’ understanding
not to offer certain types of bundled of critical topics such as regulatory efforts
discounts involving legacy Horizon drugs. The agencies’ disfavoring of remedies clauses, remedy commitments, the end
has dramatically changed the merger date and reverse termination fees. <
 DOJ M&A Safe Harbor Policy
12 A Brief Overview of the Recently Announced Policy

O n October 4, 2023, DOJ announced

a safe harbor policy that may shield
companies from criminal prosecution for
M&A SAFE HARBOR POLICY

The M&A Safe Harbor Policy builds

consultants made by two companies Safran
acquired, cooperated with the ensuing
investigation and remediated the issues.
misconduct they uncover at companies on the Corporate Enforcement Policy
they are acquiring or have recently by implementing a department-wide
KEY CONSIDERATIONS
acquired. Under the M&A Safe Harbor framework that focuses specifically on
Policy, DOJ will presumptively decline the M&A process. This is intended to The M&A Safe Harbor Policy underscores
to prosecute acquiring companies that create greater consistency across DOJ. the importance of robust due diligence
voluntarily self-report misconduct they To be eligible for a declination under the during the acquisition process to make
discover within six months from the M&A Safe Harbor Policy (which applies sure an acquiring company understands
date of closing, cooperate with DOJ and to antitrust, sanctions and other criminal potential criminal exposure at the
“fully remediate” the misconduct within violations), an acquiring company must: target company. Including compliance
one year from the date of closing. issues as a regular part of the diligence
– self-report misconduct committed by the process, and not an afterthought as a deal
The policy, which will be applied across acquired company within six months
is about to close, is key to identifying
from the date of closing, regardless of
the entire DOJ (particularly in areas and addressing relevant risks.
whether the illegal activity was identified
implicating cybersecurity, technology
before or after the acquisition; and While incentivizing voluntary self-
and national security), adds timelines
and more precise standards to a similar – fully remediate the misconduct disclosures through the presumption
policy that had previously been applied within a year of the closing date. of declinations, the M&A Safe Harbor
in the Foreign Corrupt Practices Act Policy does have specific requirements
(FCPA) Unit of DOJ and follows previous These baseline time frames are subject as to the timing of disclosure and
policy revisions aimed at encouraging to a reasonableness analysis and remediation. Although DOJ suggested
voluntary self-disclosures of criminal may be extended by DOJ depending there may be some flexibility in these
misconduct by similarly offering on the facts and circumstances deadlines, companies should expect the
potential declinations of prosecutions. of a particular transaction. deadlines will be enforced in the absence
The M&A Safe Harbor Policy is also the of discussions and assurances from DOJ
The policy provides that aggravating
latest in a series of policy and guidance and in situations involving ongoing or
factors—which include involvement by
updates from DOJ regarding corporate imminent harm (particularly in the area
executive management in misconduct,
compliance programs that are aimed at of national security), companies should
significant profits from misconduct, and
incentivizing companies to discourage not delay self-disclosure if they wish
egregious or pervasive misconduct—at
and disclose corporate malfeasance. The to take full advantage of the policy.
the acquired company will not have any
policy is, however, DOJ’s most focused impact on the acquiring company’s ability Acquiring companies should act
effort regarding M&A transactions across to obtain a declination. At the same diligently during the M&A process
industries and enforcement areas. time, aggravating factors may prevent to identify criminal misconduct at
an acquired company from receiving a acquired companies and consider the
BACKGROUND declination based on a self-disclosure benefits and risks of potential disclosure
from an acquiring company. Furthermore, to DOJ. At the same time, companies
In January 2023, Kenneth A. Polite Jr.
misconduct disclosed under the M&A must remain mindful that DOJ has
announced revisions to DOJ’s FCPA
Safe Harbor Policy will not be taken into specified that the policy applies to only
Corporate Enforcement Policy and
consideration for any future recidivist “criminal conduct discovered in bona
expressly extended its application to
analysis for the acquiring company. fide, arm’s-length M&A transactions”
all corporate criminal matters handled
and “does not apply to misconduct that
by DOJ’s Criminal Division. Similar The policy applies only in the
was otherwise required to be disclosed
to the M&A Safe Harbor Policy, the criminal context and does not
or already public or known to [DOJ].”
revised and expanded Corporate affect civil merger enforcement.
Enforcement Policy offers a presumption The M&A Safe Harbor Policy provides
of a declination to companies that Even before the M&A Safe Harbor Policy
potentially helpful incentives to
voluntarily self-disclose misconduct was announced, recent enforcement
disclose malfeasance and avoid
to the DOJ, fully cooperate, timely actions demonstrate the premium DOJ has
prosecution, but companies should
and appropriately undertake remedial placed on voluntary self-disclosure in the
proceed cautiously to ensure they are
measures, and disgorge any profits from M&A context. For example, in December
eligible for the policy’s benefits. They
unlawful conduct, but the policy does not 2022, Safran S.A. received a declination
should also be mindful that restitution
provide timelines and other specifics. of prosecution with disgorgement after it
and disgorgement, as well as a public
voluntarily disclosed information about
recitation of the facts, will be required
improper pre-acquisition payments to
even if DOJ declines prosecution. <
 A Comparison of Deal Terms in Public and Private Acquisitions
13 Market Data Highlights Key Differences

P ublic and private company

M&A transactions share many
characteristics but also involve
DUE DILIGENCE

When a public company is acquired,

TIPS TO MINIMIZE LITIGATION RISK
Although a public target’s board may not be able
different rules and conventions. the due diligence process differs to avoid litigation entirely, a sound process will
(Business combinations involving from the process followed in a allow the target to anticipate and deflect many
SPACs or other “shell companies” are private company acquisition: common challenges to proposed acquisitions:
subject to additional considerations – Hire qualified (and unconflicted) advisors
that are not discussed below.) – Availability of SEC Filings: Due diligence
to steer the process and lead the
typically starts with the target’s SEC
negotiations with potential buyers.
filings, enabling a potential acquirer to
GENERAL CONSIDERATIONS investigate in stealth mode until it wishes – If potential conflicts exist, establish a
to engage the target in discussions. committee of disinterested directors and task
Public and private company acquisitions them with active oversight of the process.
differ in various fundamental respects:
– Speed: The due diligence process is often – Give due consideration to the array of
– Structure: An acquisition of a private quicker in an acquisition of a public financial and/or strategic parties that
company may be structured as an company because of the availability should be solicited and share information
of SEC filings, thereby allowing the with bidders on equal terms.
asset purchase, a stock purchase or a
merger. A public company acquisition parties to focus quickly on the key – Keep bidding competitive, and instruct
is generally structured as a merger, risks and transaction points. management not to discuss the terms of
often in combination with a tender their future employment or compensation
with potential buyers until authorized
offer for all-cash acquisitions. MERGER AGREEMENT
by the board (typically after the price
and other major terms are in place).
– Letter of Intent: If a public company The merger agreement for an
is the target in an acquisition, there is acquisition of a public company – Negotiate hard over the price and deal terms,
usually no letter of intent. The parties reflects a number of differences from which should be sufficiently flexible to permit
typically go straight to a definitive its private company counterpart: the board to comply with its fiduciary duties.
agreement, due in part to concerns
– Representations: In general, the – Contemporaneously prepare minutes of board
over creating a premature disclosure and committee meetings in order to help
representations and warranties from demonstrate the robustness of the process.
obligation. Sometimes an unsigned
a public company are less extensive
term sheet is also prepared. – Make fulsome disclosures in the proxy
than those from a private company,
statement, and involve litigation counsel
– Timetable: The timetable before signing are qualified in some respects by the to review the disclosures in advance.
the definitive agreement is often more public company’s SEC filings, may
compressed in an acquisition of a public have higher materiality thresholds,
company. However, more time may be and do not survive the closing. called a “contingent value right” is not
required between signing and closing to uncommon in the life sciences sector.
prepare and circulate a proxy statement – Exclusivity: The exclusivity provisions
for stockholder approval (unless a tender
are subject to a “fiduciary exception” – Deal Certainty and Protection: The
permitting the target to negotiate with negotiation battlegrounds are the
offer structure is used), to comply with
a third party making an unsolicited provisions addressing deal certainty
notice and timing requirements, and
offer that may be deemed superior (principally the closing conditions)
to obtain antitrust clearances that may
and, in certain circumstances, and deal protection (exclusivity, voting
be unnecessary (or easier to obtain) in
to change the target board’s agreement, termination and breakup fees).
smaller, private company acquisitions.
recommendation to stockholders.
– Confidentiality: The potential damage SEC INVOLVEMENT
from a leak is much greater in an – Closing Conditions: The “no material
adverse change” and other closing The SEC plays a significant role in
M&A transaction involving a public
conditions are generally drafted so as acquisitions involving a public company:
company, and rigorous confidentiality
to limit the target’s closing risk and
precautions are taken accordingly.
give the acquirer little room to refuse to – Form S-4: In a public acquisition, if
– Litigation Risk: Litigation against the complete the transaction if regulatory the acquirer is issuing stock to the
target, its board of directors and/or and stockholder approvals are obtained. target’s stockholders, the acquirer must
the acquirer is much more common in register the issuance on a Form S-4
acquisitions of public targets than private – Post-Closing Obligations: Post- registration statement that is filed with
closing escrow or indemnification (and possibly reviewed by) the SEC.
targets. The board of a public target
arrangements are extremely rare.
almost always (and the board of the
– Proxy Statement: Absent a tender offer,
acquirer sometimes) obtains a fairness – Earnouts: Earnouts are unusual, the target’s stockholders, and sometimes
opinion from an investment banking firm. although a form of earnout arrangement the acquirer’s stockholders, must approve
 A Comparison of Deal Terms in Public and Private Acquisitions
14 Market Data Highlights Key Differences

the transaction. Stockholder approval • Among deals with purchase price intended to limit or eliminate seller
is sought pursuant to a proxy statement adjustments, a separate escrow liability based on extra-contractual
that is filed with (and often reviewed by) to secure the purchase price statements, are more likely.
the SEC. Public targets (subject to certain adjustment is much more likely.
• Seller representations and warranties
exceptions) must provide for a separate,
nonbinding stockholder vote with respect
– Representations and Warranties: are much less likely to survive
the closing; when they do survive
to all compensation each named executive • The seller is much less likely to the closing, they have a median
officer will receive in the transaction. provide a “10b-5” representation. survival period of 12 months.
– Tender Offer Filings: In a tender offer • “Pro-sandbagging” provisions • Any indemnification obligations of
for a public target, the acquirer must file allowing the buyer to seek the seller are much more likely to be
a Schedule TO and the target must file indemnification for the seller’s subject to a “deductible” (in which
a Schedule 14D-9. The SEC staff reviews misrepresentations even if the buyer the seller is liable only for damages in
and often comments on these filings. knew of the misrepresentations prior excess of a specified threshold amount)
to closing are much less likely. than a “tipping basket” (in which the
– Other SEC Filings: Many Form 8-Ks seller is liable for all damages once the
and other SEC filings are often • Deals are much more likely
to provide that materiality threshold amount has been reached).
required by public companies
engaged in M&A transactions. qualifications in representations
and warranties are disregarded COMPARISON OF SELECTED
– Public Communications: Elaborate for purposes of determining DEAL TERMS
SEC regulations govern public both breaches and damages.
Set forth below is a comparison of selected
communications in the period
between the first public announcement
– Liability Provisions: deal terms in public target and private
target acquisitions based on data from
of the transaction and the closing • “Non-reliance” and “no other the MarketStandard database of SRS
of the transaction. Most written representations” provisions, which are Acquiom and the most recent deal points
communications in connection with
a business combination transaction
must be filed with the SEC. Fiduciary Exception to
“10b-5” Representation
“No-Shop/No-Talk” Covenant
IMPACT OF R&W INSURANCE PUBLIC (ABA) Not reported PUBLIC (ABA) 100%
Representation and warranty insurance PRIVATE (ABA) 7% PRIVATE (ABA) 9%
(R&W insurance) provides coverage for
PRIVATE (SRS ACQUIOM) 23% PRIVATE (SRS ACQUIOM) –
indemnification claims arising from
misrepresentations by the seller in the Standard for Accuracy Opinion (Nontax) of Target’s
sale of a company. The use of R&W of Target Representations at Closing Counsel as Closing Condition
insurance continues to be prevalent, PUBLIC (ABA) PUBLIC (ABA) Not reported
particularly in sales of privately held “MAC/MAE” 97%
companies backed by venture capital or Other standard 3%
PRIVATE (ABA) 1%
private equity investors, although usage
declined somewhat in 2022 and early 2023
PRIVATE (SRS ACQUIOM) 4%
compared to 2021, according to studies PRIVATE (ABA)
conducted by SRS Acquiom (a provider “MAC/MAE” 74%
“In all material respects” 23% Appraisal Rights Closing Condition
of post-closing management services).
“In all respects” 2%
The presence of R&W insurance in private PUBLIC (ABA) 2%
company acquisitions influences the PRIVATE (SRS ACQUIOM)
negotiated outcomes of various deal terms. “MAC/MAE” 41% PRIVATE (ABA) 81%
Below is a brief summary of the principal “In all material respects” 55%
effects of buy-side R&W insurance, based “In all respects” 4% PRIVATE (SRS ACQUIOM) 47%
on studies conducted by SRS Acquiom.
Inclusion of “Prospects”
Acquirer MAC/MAE Closing Condition
– Financial Terms: in MAC/MAE Definition
PUBLIC (ABA) 2% PUBLIC (ABA) 100%
• Indemnification escrows
are significantly smaller (or PRIVATE (ABA) 10% PRIVATE (ABA) 93%
eliminated entirely). PRIVATE (SRS ACQUIOM) 16% PRIVATE (SRS ACQUIOM) 98%
 A Comparison of Deal Terms in Public and Private Acquisitions
15 Market Data Highlights Key Differences

studies available from the Mergers & • An “in all material respects” standard
Acquisitions Committee of the American provides that the representations POST-CLOSING
Bar Association’s Business Law Section. and warranties of the target must INDEMNIFICATION CLAIMS
The SRS Acquiom data is for acquisitions be true and correct in all material
Based on an SRS Acquiom study analyzing
of private targets by US public companies respects as of the closing. post-closing indemnification claims in
with purchase prices ranging from $25–$750 more than 700 private target acquisitions
• An “in all respects” standard provides
million in which SRS Acquiom served as with fully released escrows during the
that each of the representations period from the fourth quarter of 2020
shareholder representative and that closed
and warranties of the target through the second quarter of 2022:
in 2022 or the first half of 2023. The ABA
must be true and correct in all
private target study is based on publicly – Frequency of Claims: 30% of all
respects as of the closing.
available agreements for acquisitions of transactions had at least one post-
private targets by public companies with – Inclusion of “Prospects” in MAC/MAE closing indemnification claim (excluding
purchase prices ranging from $30–$750 Definition: Whether the “material purchase price adjustments) against the
million that were completed (or for which escrow. Claim frequency was lowest
adverse change/effect” definition in
definitive agreements were executed) in 2022 (16%) in deals valued at more than $500
the acquisition agreement includes million and highest (37%) in deals valued
or the first quarter of 2023. The ABA public “prospects” along with other target between $50 million and $100 million.
target study is based on merger agreements metrics, such as the business, assets, At 31% to 32%, claim rates were very
for transactions with US public company properties, financial condition and similar among US public buyers, US private
targets with total deal consideration in results of operations of the target. buyers and US private equity buyers.
excess of $200 million that were completed
– Fiduciary Exception to “No-Shop/ – Size of Claims: Median claim size as a
in 2021, 2022 and the first half of 2023 percentage of the escrow ranged from a high
(excluding de-SPAC transactions and No-Talk” Covenant: Whether the “no-
of 13% for regulatory compliance claims to
transactions involving targets majority- shop/no-talk” covenant prohibiting
less than 1% for transaction fees/costs and
owned by the buyer, real estate investment the target from seeking an alternative capitalization claims. On average, claim size
trusts, business development companies acquirer includes an exception as a percentage of the escrow was highest
and companies formed in US territories). permitting the target to consider an on deals valued at more than $500 million
unsolicited superior proposal if required (89%) and on deals with US private buyers
The chart on page 14 compares the to do so by its fiduciary duties. (68%), and lowest on deals valued between
$100 million and $200 million (23%) and on
following deal terms in acquisitions
of public and private targets:
– Opinion of Target’s Counsel as Closing deals with US private equity buyers (29%).
Condition: Whether the acquisition
– Subject Matter of Claims: Overall, the
– “10b-5” Representation: A representation agreement contains a closing condition overwhelming majority of claims were for
to the effect that no representation requiring the target to provide an opinion breaches of representations and warranties
or warranty by the target contained of counsel (excluding opinions regarding (71%) and transaction fees/costs (27%).
in the acquisition agreement, and no the tax consequences of the transaction).
– Bases for Misrepresentation Claims:
statement contained in any document, – Appraisal Rights Closing Condition: Most frequently claimed misrepresentations
certificate or instrument delivered by Whether the acquisition agreement involved tax (45%), employee-related
the target pursuant to the acquisition (12%), undisclosed liabilities (11%),
contains a closing condition providing
agreement, contains any untrue statement capitalization (9%), intellectual property
that appraisal rights must not have been (6%) and financial statements (4%).
of a material fact or fails to state any sought by target stockholders holding
material fact necessary, in light of the more than a specified percentage – Resolution of Claims: Contested claims
circumstances, to make the statements in were resolved in a median of 4.4 months.
of the target’s outstanding capital
the acquisition agreement not misleading. Fraud claims (median of 20 months) and
stock. (Under Delaware law, appraisal breach of fiduciary duty claims (median
– Standard for Accuracy of Target rights generally are not available to of 18.6 months) took the most time to
Representations at Closing: The stockholders of a public target when be resolved, while claims for purchase
general standard that will be applied the merger consideration consists price adjustments were resolved the
solely of publicly traded stock.) quickest (median of 0.7 month).
to assess the accuracy of the target’s
representations and warranties set forth – Acquirer MAC/MAE Closing Condition: – Purchase Price Adjustments: 92% of all
in the acquisition agreement for purposes Whether the acquisition agreement transactions had mechanisms for purchase
of the acquirer’s closing conditions: price adjustments. Of these, 88% had a post-
contains a closing condition excusing
closing adjustment (favorable to the buyer
• A “MAC/MAE” standard provides the acquirer from closing if an event or in 48% of transactions and favorable to
that each of the representations development has occurred that has had, target stockholders in 40% of transactions).
and warranties of the target must or would reasonably be expected to have,
a “material adverse change/effect” on
– Expense Fund: 96% of all deals had
be true and correct in all respects expense funds. The average size was
as of the closing, except where the the target, either as a standalone closing $348,000 (0.58% of transaction value) in
failure of such representations and condition or through the bring-down deals with earnouts and $203,000 (0.33%
warranties to be true and correct at closing of a “no material adverse of transaction value) in other deals.
will not have or result in a material change/effect” representation. <
adverse change/effect on the target.
16 Trends in VC-Backed Company M&A Deal Terms

W e reviewed all merger transactions between 2019 and 2023 involving VC-backed targets (as reported in PitchBook after 2019
and in Dow Jones VentureSource or PitchBook for 2019) in which the merger documentation was publicly available and the deal
value was $25 million or more. Based on this review, we have compiled the following deal data:1

Characteristics of Deals Reviewed 2019 2020 2021 2022 2023

The number of deals we reviewed and the Sample Size 20 25 45 22 15

type of consideration paid in each
Cash 60% 60% 24% 41% 40%

Stock 0% 8% 18% 5% 20%

Cash and Stock 40% 32% 58% 54% 40%

Deals With Earnout 2019 2020 2021 2022 2023

Deals that provided contingent consideration With Earnout 40% 28% 42% 41% 27%
based upon post-closing performance of the
target, achievement of milestones by the target Without Earnout 60% 72% 58% 59% 73%
or other contingencies concerning the value of
target (other than balance sheet adjustments)

Deals With Indemnification 2019 2020 2021 2022 2023

Deals where the target’s shareholders or the buyer With Indemnification

indemnified the other post-closing for breaches By Target’s Shareholders 80% 88% 76%2 86% 67%
of representations, warranties and covenants By Buyer 45% 32% 29% 68% 47%

Deals With Representation and Warranty Insurance 2019 2020 2021 2022 2023

Deals that expressly contemplate

With Representation and
representation and warranty insurance 25% 68% 47% 50% 33%
Warranty Insurance

Survival of Representations and Warranties 2019 2020 2021 2022 2023

Length of time that representations Shortest 12 Mos. 12 Mos. 12 Mos. 12 Mos. 12 Mos.
and warranties survived the closing for
indemnification purposes (subset: deals where Longest 24 Mos. 18 Mos. 24 Mos. 24 Mos. 24 Mos.
representations and warranties survived the
Most Frequent 18 Mos. 12 Mos. 12 Mos. 12 Mos. 12 & 18 Mos.
closing for indemnification purposes)3
(tie)

Caps on Indemnification Obligations 2019 2020 2021 2022 2023

Upper limits on indemnification obligations With Cap 100% 100% 100% 100% 100%
where representations and warranties survived Limited to Escrow 4
86% 81% 90% 78% 80%
the closing for indemnification purposes Limited to Purchase Price 0% 0% 0% 0% 0%
Exceptions to Limits5 100% 95% 100% 89% 100%
Without Cap 0% 0% 0% 0% 0%

1
For certain transactions, certain deal terms have been redacted from the publicly available documentation and are not reflected in the data compiled in this table.
2
Excludes two transactions that do not provide for indemnification but permit setoff against contingent consideration.
3
Measured for representations and warranties generally; specified representations and warranties may survive longer.
4
Includes two transactions in 2021 and one transaction in 2023 where the limit was below the escrow amount.
5
Generally, exceptions were for fraud, willful misrepresentation and certain “fundamental” representations commonly including capitalization, authority and validity. In a limited number of transactions, exceptions also included intellectual
property representations.
17 Trends in VC-Backed Company M&A Deal Terms

Escrows 2019 2020 2021 2022 2023

Deals having escrows securing indemnification With Escrow 94% 90% 91% 89% 90%
obligations of the target’s shareholders % of Deal Value
(subset: deals with indemnification Lowest 6 10% 8% 5% 7% 5%
obligations of the target shareholders) Highest 13% 15% 18% 15% 10%
Most Frequent 12% 15% 10% 8% 6%
Length of Time7
Shortest 12 Mos. 12 Mos. 12 Mos. 12 Mos. 12 Mos.
Longest 36 Mos. 24 Mos. 36 Mos. 30 Mos. 24 Mos.
Most Frequent 12 Mos. 12 Mos. 12 Mos. 12 Mos. 12 & 18 Mos.
(tie)
Exclusive Remedy 64% 68% 53% 73% 56%
Exceptions to Escrow Limit
Where Escrow 100% 92% 100% 91% 100%
Was Exclusive Remedy 5

Baskets for Indemnification 2019 2020 2021 2022 2023

Deals with indemnification only for amounts Deductible 56% 52%8 71%9 53%8 80%
above a specified “deductible” or only after
a specified “threshold” amount is reached Threshold 44% 29%8 26%9 32%8 10%

MAE Closing Condition 2019 2020 2021 2022 2023

Deals with closing condition for the absence Condition in Favor of Buyer 100% 100% 97% 100% 91%
of a “material adverse effect” with respect to
the other party, either explicitly or through Condition in Favor of Target 35% 24% 37% 29% 18%
representation brought down to closing

Exceptions to MAE 2019 2020 2021 2022 2023

Deals where the definition of With Exception10 100% 100% 95%11 100% 100%
“material adverse effect” for the target
contained specified exceptions

6
Excludes transactions that also specifically referred to representation and warranty insurance as recourse for the buyer.
7
Length of time does not include transactions where such time period cannot be ascertained from publicly available documentation.
8
A “hybrid” approach with both a deductible and a threshold was used in another 10% of these transactions in 2020 and 11% of these transactions in 2022.
9
A 50/50 cost sharing approach was used in another 3% of these transactions in 2021.
10
Generally, exceptions were for general economic and industry conditions.
11
The only transaction(s) not including such exceptions provided for a closing on the same day the definitive agreement was signed.
We Wrote the Book on Going Public.
You can write the next chapter.

“[This book] is quickly becoming the bible

of the I.P.O. market.”
— The New York Times
(The Deal Professor, January 19, 2010)

“Comprehensive in scope, informative,

incisive, and … an important reference
and informational tool.”
— Burton Award, Outstanding Authoritative Book
by a Partner in a Law Firm, 2013

“CEOs should keep this book at their side from the

moment they first seriously consider an IPO … and
will soon find it dog-eared with sections that inspire
clarity and confidence.”
— Don Bulens, CEO of EqualLogic at the time it
pursued a dual-track IPO

“A must-read for company executives, securities

lawyers and capital markets professionals alike.”
— John Tyree, Managing Director, Morgan Stanley

More information at IPOguidebook.com

Book available from PLI.edu
 Want to know more
about the IPO and
venture capital markets?

WilmerHale’s 2024 IPO Report offers a detailed

review of the IPO market and outlook, plus useful
market metrics and need-to-know information for
pre-IPO companies. We review how practices
continue to evolve regarding financial disclosure
and the adoption of new or revised accounting
standards by emerging growth companies (EGCs)
and discuss recent cases that clarify how the duty
of oversight applies to both directors and officers.
We look at reverse mergers as an IPO alternative
that is gaining traction in the life sciences sector;
discuss recent SEC enforcement actions that
highlight the importance of D&O questionnaires;
identify the pros and cons of ESPPs; and summarize
new rules adopted by the SEC for Schedules 13D
and 13G. Finally, we outline recent accounting
developments and provide a preview of expanded
accounting and auditing standards.

See our 2024 Venture Capital Report for an

in-depth US venture capital market analysis and
outlook, including industry and regional
breakdowns. We review changes in market
practices and state laws regarding noncompete
provisions and provide guidance on how to address
the changing landscape. We explore the business,
legal and process considerations private companies
must balance in evaluating whether and how to
implement an option repricing. We provide an
overview of fundraising challenges and
opportunities for emerging defense tech companies.
We discuss developments in laws governing foreign
investments, including both the inbound investment
review regime of the Committee on Foreign
Investment in the United States (CFIUS) and
outbound investment regime proposed by the Biden
Administration’s recent executive order. Finally, we
offer a roundup of deal term trends in VC-backed
company M&A transactions and convertible note,
SAFE and venture capital financings.

wilmerhale.com/2024CorporateReports
Data Sources: M&A data is sourced from S&P Global Market Intelligence. WilmerHale compiled the data for sales
of VC-backed companies from PitchBook.

Special note on data: The M&A data discussed in this report is based on announced transactions excluding transactions
that are subsequently terminated. As a result, reported M&A data for a given year may be adjusted over time to reflect
the removal of terminated transactions and the inclusion of previously unannounced transactions. © 2024 Wilmer Cutler Pickering Hale and Dorr llp
 24_0003 WilmerHale recognizes its corporate responsibility to environmental stewardship.

Connect with us wilmerhale.com

Wilmer Cutler Pickering Hale and Dorr llp is a Delaware limited liability partnership. WilmerHale principal law offices: 60 State Street, Boston, Massachusetts 02109, +1 617 526 6000; 2100 Pennsylvania Avenue, NW,
Washington, DC 20037, +1 202 663 6000. Our United Kingdom office is operated under a separate Delaware limited liability partnership of solicitors and registered foreign lawyers authorized and regulated by the Solicitors
Regulation Authority (SRA No. 287488). Our professional rules can be found at www.sra.org.uk/solicitors/code-of-conduct.page. A list of partners and their professional qualifications is available for inspection at our UK office.
In Beijing, we are registered to operate as a Foreign Law Firm Representative Office. This material is for general informational purposes only and does not represent our advice as to any particular set of facts; nor does it represent
any undertaking to keep recipients advised of all legal developments. Prior results do not guarantee a similar outcome. Photographs within may not be of firm personnel or clients. © 2024 Wilmer Cutler Pickering Hale and Dorr llp