Weil released its annual review of sponsor-led take-privates earlier this month. The headline takeaway: willing sellers and favorable valuations (particularly in technology and healthcare) helped power a busy year for public-to-private deals in 2024.
Sponsors announced or completed 35 take-privates greater than $100 million last year, up slightly from 31 in 2023. Aggregate deal value, however, rose more than 25 percent with a higher concentration of deals above $1 billion.
One driver is the continued lack of acquisitive interest from strategics — Ernst & Young data show a 17-percent drop in sales to corporate buyers last year.
As strategics sit on the sidelines, financial buyers have taken advantage of less-competitive processes to get more deals over the line.
Another tailwind has been the robust debt financing environment. Syndicated, high yield, and private credit financing options all offered more favorable terms last year. By the end of September, syndicated leveraged loan volume of more than $1.045 trillion was 93 percent higher than the same period in 2023.
Increased lender competition and early rate cuts have helped lower the cost of borrowing.
“At the beginning of 2024, Term SOFR for 1 month and 3 months was 5.35 percent and 5.36 percent per annum,” notes Weil. “By December 2, 2024, the same benchmarks had fallen to 4.64 percent and 4.89 percent per annum, respectively.”
Looking at deal terms, Weil calls out a jump in usage of reverse termination fees—83 percent of surveyed transactions included one, reversing a recent downward trend. Despite some variation in fee levels, mid-single-digit percentages of equity value remain most common.
One-step mergers are still the norm, yet a handful of sponsors opted for two-step tender offers as a quicker route to closing (or to reprice a transaction). Weil notes that tender offers could become an attractive option if the market becomes more competitive, but for now, most sponsors prefer the longer runway of a single-step merger to manage debt financing processes.
Use of go-shop provisions remained at the lower end of the historical range—just 20 percent of deals, down from 29 percent in 2023. As market checks make post-signing bid solicitation less important, targets see less need to negotiate on the point. Weil also said it was unable to find any links between go-shops and final deal price, implying that the decision tends to be highly situation-specific.