DLA Piper sees rise in private equity activity in M&A auctions

“Over the past year, private equity investors have seen the opportunity to capitalise on favourable market conditions, with larger investors preferring auctions. More than half of all large deals surveyed were auctions compared to only 10% of small deals,” said DLA Piper partner Grant Koch.

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While the approach of private equity and trade during M&A transactions was different, the report saw increased evidence of convergence of approach, with trade buyers adopting private equity style strategies when executing deals.

For example, in warranty and indemnity insurance products (initially used almost exclusively by financial sponsors but increasingly used on large deals), the report found that more than half of large deals (67%) last year used buy-side insurance compared to only 14% of small deals.

“In Australia, the use of buy-side insurance in deals where private equity is involved is a given and almost a non-negotiable,” said DLA Piper Australia partner Jyoti Singh. “In the Asia-Pacific market, underwriters are becoming familiar with assets which have previously been sold subject to W&I insurance, which are then sold again a few years later with the same insurer being asked to underwrite the transaction for the new buyer. This can lead to a very streamlined W&I process and reduce the complexity of the transaction negotiations in this area.”

For the 12th consecutive year, DLA Piper was the highest-ranked legal advisor for M&A deal volume globally – having been involved in 1,104 transactions worldwide in 2021, valued at approximately US$242 billion, according to Mergermarket’s league tables.