A Look at U.S. Sponsor-Backed Going Private Transactions

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We surveyed 22 sponsor-backed going private transactions announced between January 1, 2016 and December 31, 2016 with a transaction value of at least $100 million. The publicly available information for certain surveyed transactions did not disclose all data points covered by our survey. Therefore, the charts and graphs in this survey may not reflect information from all surveyed transactions. All dollar amounts and percentages referenced in this survey are approximate amounts and percentages. Key trends for going private transactions in the United States in 2016 included:

  • As was the case in 2015 and 2014, none of the surveyed going private transactions in 2016 contained a financing out (i.e., a provision that allows the acquirer to get out of the deal without the payment of a fee or other recourse in the event the debt financing is unavailable).
  • Specific performance lite continued to be the predominant market remedy with respect to allocating financing failure and closing risk in sponsor-backed going private transactions and was included in 73% (16 of 22) of the surveyed going private transactions in 2016. Full specific performance was available to targets in 27% (6 of 22) of the surveyed going private transactions in 2016. The transactions where full specific performance was available were “all equity” transactions.
  • Similarly, the reverse termination fee construct appeared in 73% (16 of 22) of the surveyed going private transactions in 2016 (as compared to 64% (14 of 22) of the surveyed going private transactions in 2016). The increase in the appearance of the reverse termination fee construct was due to the decrease in the number of “all equity” transactions surveyed in 2016.
  • The mean single-tier reverse termination fee that would have been payable by sponsors in certain termination scenarios was 4.9% as a percentage of the enterprise value of the target, which is a decrease as compared to the 5.7% as a percentage of the enterprise value of the target in 2015. The mean target termination fee was 3.0% as a percentage of enterprise value of the target, which is relatively consistent with the mean target termination fee of 3.2% as a percentage of the enterprise value of the target in 2015.
  • Go-shop provisions remain popular, appearing in 50% of the surveyed going private transactions in 2016 as compared to 46% of the surveyed going private transactions in 2015 and 38% of the surveyed going private transactions in 2014. The mean length of the go-shop periods in the surveyed transactions in 2016 was 31 days (a decrease from 38 days in the surveyed going private transactions in 2015).
  • 100% of the surveyed going private transactions in 2016 that contained go-shop provisions provided for a two-tier termination fee provision. The reduced termination fee in the surveyed going private transactions in 2016 that contained go-shop provisions ranged from approximately 33% to 62% of the general termination fee, with the mean being 46%.
  • Tender offers continue to be a relatively unpopular option for sponsors. Tender offers were used in 18% (4 of 22) of the surveyed going private transactions in 2016, which is an increase as compared with 5% of the surveyed transactions in 2015 and 13% of the surveyed transactions in 2014. From a sponsor’s perspective, the tender offer remains a less attractive option compared to a one-step merger unless agreeing to a tender offer improves its position in a competitive bid process.

Click here to see the findings of our Survey.