Financial transaction

Increase in private equity transaction volumes | New

DLA Piper’s eighth annual M&A report was released and in one of the hottest years on record for M&A.

The report found that private equity accounted for 39% of sellers in M&A auctions last year – compared to just 24% in 2020 and 50% of auction buyers – showing that sellers and buyers of equity -investment were the most likely to be involved in the auction.

“Over the past year, private equity investors have seen the opportunity to capitalize on favorable market conditions, with larger investors preferring auctions. More than half of all large deals surveyed were auctions, compared to only 10% of small transactions,” said Grant Koch, Partner, DLA Piper.

The report also found that while there remain key differences in the approach private equity and commerce take when conducting M&A transactions, there is growing evidence of the convergence of the approach with commercial buyers adopting private equity style strategies in the way they execute trades.

This convergence of approach is nowhere more evident than when we examine the continued use of warranty and indemnity insurance, a product which was initially used almost exclusively by financial sponsors but which is increasingly also used by strategic buyers, as general business understanding and acceptance of the product continues to increase. The report revealed that buyer-side warranty and indemnification insurance continues to be used for large transactions. Last year, more than half of large deals used buy-side insurance, compared to just 14% of small deals. Buy-side assurance was used in 67% of large transactions where an auction process was executed.

“In Australia, the use of buy-side insurance in transactions where private equity is involved is a given and almost non-negotiable,” said Jyoti Singh, Partner, DLA Piper Australia.

“In the Asia-Pacific market, insurers are familiarizing themselves with assets that were previously sold under W&I insurance, which are then resold a few years later, with the same insurer being asked to underwrite the transaction for the new buyer. to a very streamlined W&I process and reduce the complexity of transaction negotiations in this area,” added Jyoti.

The report also revealed that there is an ever-increasing number of M&A transactions where pre-sale corporate reorganizations were required at some point in the broader transaction process requiring input across multiple jurisdictions and areas. of specialized practice.

Mark Burger, Partner, DLA Piper, said local compliance burdens on global businesses and structures, and the growing focus on good governance, drive the need for business simplification projects.

“Many stakeholders need to be involved and properly coordinated to achieve the desired results in terms of cost and efficiency. We are seeing continued customer interest in using our innovative and collaborative global technology platforms to manage and deliver these complex projects,” said Mark..

For the 12th consecutive year, DLA Piper was the world’s top-ranked legal advisor for M&A deal volume, according to Mergermarket rankings. The firm was involved in 1,104 transactions globally in 2021, valued at approximately US$242 billion.