According to the latest research, the balance of power appears to be angled towards companies making acquisitions in Australia, with only a handful of key deal terms favouring sellers. Broadly speaking, deal activity is on the up in Australia, with the median value of deals within KWM's sample more than doubling from last year's study.
'The Australian private M&A market remains very active. With such a high level of cross-border deal activity it is more important than ever to understand the deal framework which your counterparties are used to,' said KWM partner Ros Anderson of the DealWatch project.
According to this year's data, the increase in the use of Material Adverse Changes (MAC) conditions in Australian M&A has been sustained for a second year and currently stands at 52 per cent of all the deals in the KWM sample. The incidence of MAC conditions even holds at a comparable level among highly competitive sales processes, KWM reports.
The number of negotiated deals in Australia that include protections for buyers under which the seller gives some sort of assurance as to compliance with relevant anti-corruption and anti-bribery regulations has reportedly almost doubled over the last three years. Meanwhile, the acceptance by sellers to stand behind the management accounts data has lifted more than 50 per cent in the last five-year period.
Though the DealTrends data paints a picture of Australian M&A as very much a buyer's market, there are a few deal terms on which sellers are gaining traction. The median cap on sellers' liability has decreased, while the proportion of deals which use warranty and indemnity insurance has lifted from 15 per cent to 37 per cent in the last five years, sitting as high as 67 per cent for highly competitive sales processes.
'Take up of warranty and indemnity insurance is not only high generally in Australia, it is also high in both cross-border deals and competitive sales processes run out of Australia, so offshore counterparties who are likely to be less familiar with this structure need to be across how this works and where the gaps are,' commented co-author and senior KWM associate Matt Coull.
The capacity for sellers to secure deposits is also on the up, with 33 per cent of competitive sales processes featuring a deposit in their terms.
Sources: KWM; Lawyers Weekly
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