Middle Market M&A Key Deal Terms

A major law firm has completed a survey on trends and deal points in the M&A industry. The survey contains data and trends on many key points the M&A legal practitioner should be aware of as they negotiate M&A transactions, and the findings in the summary mirror our own experience in the market. In general in more recent transactions we have seen a continuing trend lower escrowed indemnity amounts, higher usage of representation and warranty (“R&W”) insurance, and generally more seller-favorable deal terms. The survey population consists of more than 175 middle-market private target deals signed during the pandemic years of 2020 and 2021. The deals are sub-$1 billion deals and highlight the impact that increased use of R&W insurance has on key negotiated deal terms. Below are a few key findings regarding indemnity escrows for both insured & uninsured deals, each of which indicates a strong seller market:

  • The median indemnity escrow amount during 2020 and 2021 for the non-insured deals surveyed was approximately 8% of the purchase price (trending downward from approximately 10% in 2018 and 2019).
  • Approximately 91% of non-insured deals had an indemnity escrow amount of 10% or less (as compared to approximately 83% in 2019), but only approximately 26% of non-insured deals had an indemnity escrow amount of 5% or less, which is consistent with 2019.
  • The median indemnity escrow amount in 2020/2021 for the insured deals surveyed was approximately 0.5% of the purchase price (as compared to approximately 0.6% in 2019 and 0.9% in 2018). It is plain to see the dramatic impact that R&W insurance has on the indemnity escrow amount (approximately 0.5% for insured deals, as compared to approximately 8% for non-insured deals).
  • The vast majority of insured deals had an indemnity escrow amount of less than 5%, and of those deals, approximately 89% had an indemnity escrow amount of 1% or less (as compared to 91% in 2019). This is consistent with the prevailing R&W insurance structure of including a retention (deductible) equal to approximately 1% of deal value.

Reflecting these most recent deal trends, Dorsey has enhanced our Transactional Risk Insurance Practice, adding Michael Budabin McQuown as head of our Transactional Risk Insurance group and expanding the services we provide. In addition to representing buyers and sellers in M&A transactions and assisting them with obtaining and negotiating R&W insurance policies, Dorsey also represents R&W insurance underwriters as they negotiate policies and manage claims. This has given us an inside view of what is possible in insuring risk, and represents a valuable advantage in future transactions.

Seyfarth Shaw LLP’s M&A survey also covers other indemnity-related provisions, rep & warranty survival provisions & carve-outs from general survival provisions, fraud exceptions & definitions, and governing law provisions. The survey can serve as a meaningful pocketbook reference for M&A practitioners and it is worth reviewing the study to enhance your views on the ever-changing M&A landscape.


Niels practice includes mergers, acquisitions, private securities offerings, debt financings, corporate governance and other general matters of business law. He has represented private, public and emerging companies in a broad range of industries and sectors, including software, real estate, manufacturing and energy.

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