CMS European M&A Study 2019

The CMS Corporate/M&A group is pleased to launch the eleventh edition of our European M&A Study. 

This year’s Study reflects data from 458 deals in 2018 on which CMS advised. This is the largest number of deals ever covered by the Study, now in its 11^th year, which is reflective of CMS’s gain in market share and corresponding rise up the M&A league tables. In analysing the 2018 market, we report on current market standards on risk allocation in M&A deals, comparing 2018 against 2017 and the previous eight-year average for 2010 – 2017.

The special features of the Study are as follows:

• CMS Trend Index – to illustrate a current fact or trend for the particular feature reported on, comparing the position in 2018 with that of 2017 and / or the eight-year period 2010 – 2017.
• CMS European / US risk allocation comparison – a headline analysis of the differing risk allocation on standard issues in European and US M&A.
• CMS European regional differences – we highlight certain issues which are particular to one or more of the six European regions covered.
• CMS deal size analysis – we analysed our data against three different deal values: deals up to EUR 25m; EUR 25m to 100m and deals exceeding EUR 100m.

For the first time, the Study sought to evaluate the main deal driver for each transaction reviewed. This is in addition to analysis of the background of the seller (mostly strategic and finance investors but also a substantial number of individuals) and the buyer (almost exclusively strategic and finance investors).

The key findings of the Study include:

• Decreased use of purchase price adjustments (PPA) – around 44 percent of deals included a PPA compared with 48 percent in 2017. This represents a notable movement against the overall trend in recent years
• Significant increase in the application of locked box structures – of the deals that did not involve a PPA, 59 percent used a locked box in 2018 which represents a significant increase over the 49 percent in 2017
• Earn-outs continue to grow in popularity – there was a two-percentage point year on year increase in the use of earn-outs in 2018. A quarter of small and mid-cap deals now involve earn-outs
• A record year for Warranty & Indemnity (W&I) insurance –sellers are increasingly offloading their warranty exposure by pre-packaging a buyer’s W&I policy. Nearly a third (30 percent) of deals valued over EUR 100m now involve this form of insurance

We trust that the CMS European M&A Study will assist you in your everyday M&A activities.