physician or APP “responsibly directs” others in the course of providing care, the employer should consider the extent of such direction (does it occur throughout the day, once a day, less?), whether the activity which the physician or APP is directing to be performed would have been performed even in the absence of such direction and whether the physician or APP is held accountable for the provision of such care that was directed to be performed. In order to ensure that restrictive covenants in employment agreements, purchase agreements, equity agreements and other corporate organizational agreements are enforceable, it is imperative that investors stay apprised of changes to these laws as they are being challenged more frequently and continue to evolve. 12. What Do “Market” Terms for M&A Deals Look Like? New 2023 ABA Deal Points Study Provides Answers BY TATJANA PATERNO Bass, Berry & Sims is pleased to provide its valued clients with key highlights from the 2023 American Bar Association (ABA) Private Target Mergers & Acquisitions Deal Points Study that was published in December 2023. The Study examines the prevalence of certain contract provisions in M&A transactions and is considered the preeminent study of M&A transaction terms. It is widely utilized by attorneys, investment bankers, corporate development teams, and other advisors to determine “what’s market” for various acquisition agreement terms. The latest biannual Deal Points Study includes over 100 pages of detailed data on various negotiated deal points in acquisition agreements. It draws on data from middle market transactions executed or closed in 2022 or Q1 of 2023 involving privately-held targets. Transactions included in the Study range in size from $30 million to $750 million and represent a broad base of industries, with technology, healthcare and financial services representing approximately 20%, 16% and 10%, respectively, of the deals analyzed.
Here are a few highlights from the Study:
1. Use of Representation and Warranties Insurance (RWI) Contracted. 55% of deals in the 2023 Study referenced RWI, as compared to 65% of the deals in the 2021 Study. This decline could be attributable to higher costs and limited availability of RWI during the period covered by the 2023 Study, could indicate market participants’ growing preference for a traditional indemnity structure, or the increasing difficulty in recovering under RWI as some RWI customers have experienced. 2. Prevalence of Earnouts. Use of earnouts increased significantly – by 30% (i.e., from 20% during the period covered by the 2021 Study to 26% during the period covered by the 2023 Study). This likely reflects the growing valuation gap that we have observed in the market during the period covered by the 2023 Study. Further, 25% of all deals with an earnout included an express disclaimer of fiduciary relationship with respect to the earnout, an increase of over 300% from the period analyzed by the 2021 Study. This could reflect a swing to more buyer- friendly terms as the M&A market changed during the more recent period. As a reminder, earnouts in healthcare transactions must be carefully structured to ensure compliance with applicable regulatory requirements. 3. #MeToo Representation Increased. 57% of all transactions analyzed in the 2023 Study included a stand-alone #MeToo representation, as compared to 37% of deals in the 2021 Study. This indicates increased focus on this issue as buyers diligence target companies. Over 50 experienced M&A attorneys from prominent law firms across the globe contributed to the Study, including Bass, Berry & Sims member Tatjana Paterno, who co-chaired the Study, and associates David Venturella and Brad Yenter. To request a copy of the 2023 Study, or if you have questions regarding the Study, please contact Tatjana Paterno at tpaterno@bassberry.com.
12 | BASS, BERRY & SIMS
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