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2025 Deal Terms Study Reveals Shifting Leverage Between Buyers and Sellers
- The private M&A activity in 2024 has been experiencing an uptick, with a projected increase in pace for the latter part of the year amidst evolving market uncertainties.
- Private equity and venture capital firms are at a critical juncture, focusing on liquidity and LP returns for success.
- Buyers are facing a competitive landscape with more investors vying for top targets, leading to a shift in M&A deal terms that benefit both buyers and sellers.
- 2025 M&A Deal Terms Study, analyzing over 2,200 private-target acquisitions from 2019-2024, highlights nuanced trends in negotiations.
- Deal sizes have surged, especially jumbo deals valued over $750 million, partly due to fewer earnouts as sellers push for higher upfront values.
- Earnouts remain prevalent but slightly elevated, with a trend towards shorter performance periods and around 21 cents on the dollar payout.
- Reps & Warranties Insurance (RWI) usage saw a slight increase in 2024 but remains below its peak, impacting the indemnification structures of deals.
- Buyers have become accustomed to favorable seller terms even without RWI in deals, leading to changes in representations and survival periods post-closing.
- The evolving balance of power in M&A deal terms reflects the shifting leverage between buyers and sellers, influenced by macroeconomic conditions and buyer competition.
- Market participants are advised to stay informed and flexible in their approach to dealmaking to navigate the changing M&A landscape.
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