Industry Standards for Leveraged Buyouts

A winning private equity bid is typically the one with the most zeros after it, but every now and then specific deal terms also come into play. The only problem is that most target companies don’t really know if the specific terms are buyer-friendly, seller-friendly or straight down the middle. It’s old-fashioned ignorance, borne of the private equity industry’s lack of industry standards.

Offering to help out this month is law firm Kaye Scholer LLP, which recently completed a survey of deal terms from a sample of 77 buyout transactions. You can download the results here:WhatsMarket.pdf

Kaye Scholer didn’t identify the specific deals, but did list some of the participating sponsors. Pretty good diversity of middle-and-mega-market firms, with sampled transaction sizes ranging from $90 million to $4.2 billion.

Topics include: Purchase price adjustments, indemnification, closing conditions, seller reps and warranties, buyer reps and warranties, covenants and “sandbagging.” Probably a good document for buyers, sellers and intermediaries to keep on hand.