During this session, Gregory Metz, partner and co-head of McDermott’s Private Equity Practice Group, and Partner Michael McStay moderated a panel that discussed current issues and trends in purchase agreement negotiations and rep & warranty (R&W) insurance.
Session panelists included:
- Michael Constantinides, Principal, Revelstoke Capital Partners
- Dan Skowronski, Principal, RiverGlade Capital
- Joshua Halpern, Partner & Co-Practice Leader, Transaction Liability, Lockton Companies
- Vipul Patel, Managing Director, Aon
IN DEPTH
Key takeaways included:
- Over the last six to nine months, it has become increasingly difficult to preempt auctions as buyer and seller valuation expectations have increasingly diverged.
- With the cost of debt financing increasing and availability decreasing, full equity back-stopped transactions have become increasingly compelling when deployed. Additionally, we are seeing an increased usage of rollover equity and seller notes to bridge the financing gap.
- While transaction volume is down, opportunities persist in healthcare consolidations, distressed asset sales and growth equity investments.
- The use of R&W insurance continues to be a beneficial strategy, easing the negotiation process between buyers and sellers and transferring risk to the insurance companies. We have seen more willingness on the part of sellers to pay for half or all of the R&W policy premiums. Lower deal volume, coupled with a drastic increase in the number of carriers in the marketplace over the last few years, has led to decreases in premiums, reduced retentions and broader coverage availability.
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