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PLC What's Market Wrap-up for the Week Ending September 14, 2012
Practical Law Legal Update 7-521-3696 (Approx. 3 pages)
PLC What's Market Wrap-up for the Week Ending September 14, 2012
by PLC Corporate & Securities
| Published on 13 Sep 2012 • USA (National/Federal) |
A wrap-up of recent market activity as tracked by PLC What's Market including a discussion of recent public software company acquisitions and an analysis of knowledge definitions in recent private acquisition agreements. PLC What's Market provides a continuously updated database of public merger and private acquisition agreements that allows you to analyze and compare negotiated terms, including break-up fees and indemnification provisions, across multiple deals. PLC What's Market also contains links to the underlying public documents.
Public Merger Activity: Software Deals
Software/electronics has been the most active industry sector of 2012 so far, with 21 agreements to acquire public software/electronics companies valued at $100 million or more signed this year to date. It was also the most active industry sector in 2011 (26 deals), due in part to a rally to acquire cloud-based software companies. Software companies continue to be popular acquisition targets in 2012 with four software deals signed this quarter:
- Thoma Bravo's agreement to acquire Mediware Information Systems, Inc., a developer of software for healthcare institutions, for $195 million in cash.
- Thoma Bravo's agreement to acquire enterprise software company Deltek, Inc. for $1.1 billion in cash.
- International Business Machines Corporation's agreement to acquire recruiting and talent management software-as-a-service provider Kenexa Corporation for $1.3 billion in cash.
- Apple Inc.'s agreement to acquire mobile and network security company AuthenTec, Inc. for $356 million in cash.
Both Thoma Bravo agreements, which were entered into within less than three weeks of each other, include a reverse break-up fee representing over 5% of the deal value, and would be payable by Thoma Bravo if it breaches any representations, warranties, covenants or agreements that causes certain closing conditions not to be met.
To access full summaries of these public merger agreements and to create customized reports analyzing key deal terms, visit PLC What's Market's public merger agreement database.
Private Acquisition Agreements: Definition of "Knowledge"
The defined term "Knowledge" is often heavily negotiated between buyers and sellers in private M&A deals because it can significantly affect the allocation of risk between the parties. Buyers seek to minimize the limiting effect of any knowledge qualifiers in the seller's representation or warranties by defining the seller's knowledge as broadly as possible. For example, buyers generally try to include constructive knowledge and a duty to investigate and to impute the knowledge of as many officers, employees and directors of the seller as possible. In contrast, sellers usually seek to limit the definition of knowledge to the actual knowledge of specifically named individuals, with no duty to investigate.
We analyzed the definition of "Knowledge" for the seller or target company in the last 50 deals added to the PLC What's Market private acquisition database. Of those 50 deals, 48 deals defined knowledge. Of the 48 deals:
- 35 deals limited "Knowledge" to actual knowledge.
- 12 deals specifically included constructive knowledge.
- 30 deals included some standard for inquiry or investigation.
- 43 deals limited "Knowledge" to the knowledge of certain individuals (including two deals that also specified certain officer titles rather than just naming the individuals).
To create customized reports analyzing knowledge definitions and other key deal terms, visit PLC What's Market's private acquisition agreement database.
Links above are to summaries of deals contained in PLC What's Market.
Risk Factors
Risk factor of the week: "Our Dedication to Making Decisions Based Primarily on the Best Interests of Consumers may Cause Us to Forgo Short-Term Gains" (from Zillow, Inc.'s Follow-on Equity Offering dated September 6, 2012).
PLC What's Market describes and provides examples of risk factors in a series of maintained, industry-specific practice notes. To access these practice notes, see What's Market Risk Factor Practice Notes.