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CVCA Canadian Market Overview

Following a record year for global M&A, SRS Acquiom released its 2022 Deal Terms Study , providing an analysis of deal terms in over 1,900 private-target M&A transactions in 2021. While some of the findings are limited to the U.S. context, others can be more broadly applied to the global M&A landscape. Below are key takeaways from this publication. 

Deal Volume & Consideration 

2021 saw a 64% increase in M&A deal volume from 2020. U.S. private equity buyers remained active, representing 18% of total deal volume in 2021, an increase from 12% in 2020. 2021 saw a higher ROI for equity capital investments, with a median of 5.2x in 2021, compared to 3.5x in 2020. The median number of years to exit however, increased by a full year in 2021, up to 7.1 years. 
The market significantly increased the combination of cash and stock as consideration, from 17% of deals in 2020 to 26% of deals in 2021. 

Option Treatment

With regards to treatment of options, data continues to reveal that buyers are more willing to assume options post-closing (with an increase to 22% in 2021 from 17% in 2020). In addition,  22% of deals saw a full acceleration of vesting in 2021, a decrease from 27% in 2020.

Consensus on Covid-19?

Market terms regarding pandemic particulars appear to be stabilizing, with trends in earnouts and termination fees returning to pre-pandemic levels, with certain exceptions. The market remained stable regarding carveouts to the definition of MAC in connection to Covid-related matters, from 39% of deals in 2021 including Covid-19 representations and 36% of deals including a Covid-19 carveout to the covenant to conduct business in the ordinary course. 

Effect of RWI 

Use of RWI is materially affecting deal terms, with approximately 44% of deals reported as using the product. 

  • Separate Purchase Price Adjustment Escrow. RWI deals are more likely to have separate PPA escrow (85% in comparison to 42% for deals without RWI). 
  • Seller representations. RWI deals provide comfort to buyers regarding disclosure, with 93% of deals contained neither a “10b-5” nor “full disclosure” representations, in comparison to 75% for deals without RWI .  RWI deals additionally included a higher number of “no other representations” and “non-reliance” clauses. 
  • Survival. Sellers’ representations and warranties survive closing in fewer instances where RWI is used (63% in comparison to 82% in deals without RWI). 
  • Sandbagging. Pro-sandbagging provisions are permitted more in RWI deals (59% in comparison to 33% in deals without RWI).
  • Baskets. In RWI deals, sellers’ indemnification obligations are more likely to be structured as deductible basket than first-dollar basked (10.6% first-dollar baskets and 47.2% deductible baskets for RWI deals, in comparison to 54.4% first-dollar baskets and 35.9% deductible baskets for deals without RWI deals). 
  • Escrows. There is a marked reduction in the escrow and holdback amounts for RWI deals (between 5-15% as a percentage of transaction value whereas in deals without RWI the majority remained between 0-5%). 


2021 saw a slight decrease in the number of deals (excluding life science deals) containing earnouts. Earnout length is additionally trending to shorter periods, with a median of 22.5 months. 

Survival and Indemnification

The trend towards more deals containing no survival of seller’s representations and warranties continues to rise, with 26% of deals in 2021 containing no survival, in comparison to 22% in 2020. In the case where seller’s representations and warranties do survive closing, survival periods are trending shorter.  

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