Houlihan Lokey Purchase Agreement Study

Below is a chart that shows the average, median and maximum values of the corresponding compensation conditions of the transactions reviewed over the past ten years. In all cases, the size of the numerical values is measured as a percentage of the purchase price. The study examined sales contracts to determine how many agreements contained a basket of aggregate receivables that provides that a seller is not required to repay losses until the total amount of all such losses exceeds a certain amount (the „basket“). There are two main types of baskets: (1) a dollar basket or a „tipping basket“ (i.e. if the total amount of losses exceeds the basket, the seller is responsible for the total amount of all losses) and (2) a deductible basket (i.e. if the total amount of losses exceeds the basket, the seller is only liable for losses exceeding the basket). The study also took into account sales contracts to identify how often the counter-performance (consisting of money, securities or other real estate or instruments) is refused to the seller and paid into an account at closing in order to protect the buyer for future payment of claims. According to a report by Houlihan Lokey on the allocation of purchase prices, identified intangible assets are attributed to more value and unidentified goodors are less. The study also took into account sales contracts in order to determine how many agreements contained a ceiling on the amount of damage that the buyer could recover from the seller under the compensation rules. The results of the study are valuable. By assessing the terms of sales contracts, with a particular focus on indemnification rules and how these provisions relate to insurance, guarantees and agreements in agreements, the study provides valuable information and benchmarks in the middle market and highlights recent market trends compared to data from previous iterations of the study. The analysis examined 511 transactions in which the acquiring company was headquartered in the United States and was held public. The study uses „purchasing underperformance“, the sum of the purchase price paid and the commitments taken into account in the context of a business combination.

The study excludes transactions with financial institutions that have exceptionally large intangible asset allocation rates. Modified mix: the share of intangible assets in the buying underperformance increased from 26% in 2012 to 32% on average. In contrast, the share of the buying counterparty for good fell on average to 31 percent in 2012, from 38 percent in 2011. The most frequently identified intangible asset classes were customer-related intangible assets (called in 53 per cent of stores), trademarks and trade names (41 per cent), developed technologies (39 per cent), and process research and development (9 per cent). According to Houlihan Lokey, other intangible assets, which were usually included, were non-compete clauses, licenses, authorizations and other contracts or agreements. 77% of the transactions carried out in the last ten years have had assurances and guarantees that have survived the conclusion of the agreement. Within this group of transactions, the vast majority of sales contracts analyzed contained a basket of receivables, a compensation cap and/or a fiduciary service. .

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