This past week, three agreements for public company acquisitions with a deal value of $100 million or more were filed. In each of the transactions, dealmakers opted for a tender offer structure. In what may be characterized as a slight uptick in tender offer activity, almost a third of the deals signed so far this quarter (ten of 32 deals) were two-step mergers with a front-end tender offer, as compared to ten out of 40 deals in the previous quarter.

While there is one more business week left before the third quarter closes, this data may indicate that acquisition parties are favoring tender offer structures, in slightly higher percentages, as a means to quickly close their transactions. If the use of tender offers continues at this pace until the end of the year, the second half of 2012 may close with the highest percentage of tender offers that have been seen in the last few years.

To review summaries of recent tender offer transactions in our What’s Market public merger agreement database, select "Public Merger Agreements" on PLC What's Market and then narrow your results by selecting "Yes" under the "Tender offer" facet on the left side of the screen. For further discussion on tender offers, see Practice Note, What's Market: Tender Offers.

Buyers in private M&A deals often try to include a sandbagging (or pro-sandbagging) provision to reserve their right to bring indemnification claims against the seller for breaches of representations and warranties known or discovered by the buyer before the closing. Conversely, sellers often try to include an anti-sandbagging provision to ensure that the buyer cannot bring an indemnification claim based on a breach of a representation or warranty that the buyer knew about before the closing if the buyer chooses to proceed and close the deal. If it is not able to include an anti-sandbagging provision, the seller often tries to remain silent on the issue of sandbagging because many jurisdictions interpret silence in favor of the seller.

We analyzed sandbagging provisions in the last 50 deals added to the PLC What's Market private acquisition database. Of those deals, 48 were relevant for analyzing sandbagging provisions (the remaining two deals did not include any indemnification obligations for either the buyer or seller). Of those 48 deals, 20 deals (41.67%) contained a pro-sandbagging provision and 28 deals (58.33%) were silent. None of the deals contained an anti-sandbagging provision. Of the 20 deals that contained a pro-sandbagging provision, there were two deals that did not expressly address the buyer's knowledge and one deal that required the buyer to give notice to the sellers if it knew or became aware of any representation or warranty that was inaccurate (see Synalloy Corporation acquisition of stock of Lee-Var, Inc. d/b/a Palmer of Texas). Of the 28 deals that were silent, there were two deals that included a representation by the buyer that it had no knowledge as of the signing date of a breach of any representation or warranty of the seller (see Liberty Energy (Georgia) Corp. acquisition of assets of Atmos Energy Corporation and Holly Energy Partners, L.P. acquisition of equity interests of HEP UNEV Pipeline LLC).

To create customized reports analyzing sandbagging provisions 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 factor of the week: "With our acquisition of Motorola, we face a number of manufacturing and supply chain risks that, if not properly managed, could adversely impact our financial results and prospects" (from Google Inc.'s Form 10-Q for the quarter ended June 30, 2012, as included in Practice Note, What's Market: Risk Factors: Service Industry). Also see, Practice Note, What's Market: Risk Factors: Computer and Electronic Equipment Industry.

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.