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, 2015 and December 31, 2015 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. Some of the key trends of the survey included the following:

  • Reverse termination fees appeared in 64% (14 of 22) of the surveyed transactions in 2015. The decline in percentage terms from 2014 of transactions where reverse termination fees appeared was largely due to the number of “all equity” transactions surveyed in 2015. The average single-tier reverse termination fee was equal to 5.7% of the enterprise value of the transaction and the average company termination fee was equal to 3.2% of the enterprise value of the transaction in 2015, which is relatively consistent with the average values of 5.7% of enterprise value for reverse termination fees and 3.1% of enterprise value for company termination fees in 2014.
  • The use of go-shop provisions increased in 2015, appearing in 46% (10 of 22) of the surveyed transactions in 2015, compared to 38% (6 of 16) in 2014. Go-shop provisions have proven to be a useful tool and have appeared in a significant minority of deals over the last several years.
  • Tender offers continue to be a relatively unpopular option for sponsors. A tender offer was used in 5% (1 of 22) of the surveyed transactions in 2015 and in only 13% (2 of 16) of 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.
  • As was the case in 2014, no sponsor-backed going private transaction in 2015 contained a financing out (i.e., a provision that allows the buyer to get out of the deal without the payment of a fee or other recourse in the event that debt financing is unavailable).
  • Specific performance “lite” continued to be the predominant market remedy (64%, or 14 of 22 transactions, in 2015) with respect to allocating financing failure and closing risk in sponsor-backed going private transactions. Full specific performance was available to targets in 36% (8 of 22) of the surveyed transactions in 2015. As noted above, those transactions where full specific performance was available were “all equity” transactions.

Click here to see the findings of our survey.

*other contributing authors include Adam Borenstein, Megan Briskman, Jonathan Calka, Daniel Cohen, Francesca Cohen, Robert Cohen, Clayton Collett, Sean Devaney, Kelly Diep, Sean Fitzpatrick, Kevin Kitson, David Li, Ololade Oladapo, Kelsey Pfleger, Aamir Rahman, Andrea Ryken, Michelle Sargent, Rachel Shapiro, Ariel Simon and Kimberly Thibault.