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Illustration: Annelise Capossela/Axios

Deal-making in the pandemic felt like a supercharged version of business as usual, minus the plane trips and closing dinners. But there were some significant changes inside of the deal structures, according to a new report from advisory firm SRS Acquiom.

Between the lines: Many buyers hedged their bets, offsetting high valuations with lengthy earnouts.

SRS Acquiom found that the percentage of non-life sciences deals with an earnout increased from 15% in 2019 to 19% in 2020, and that the median earnout potential as a percentage of the closing price soared from 18% to 39%.

  • It also found that nearly half of the earnouts were for two years or more, and that the percentage of earnouts based on Earnings/EBITDA rose to 24% from from 16% in 2018 and 2019 (revenue tests fell to 58% from 67%).

Other pandemic-driven changes included an increase in the percentage of termination fees included in deals (19%) and the introduction of "pandemic" and "COVID-19" carveouts into material adverse effect clauses (77% and 64%, respectively, in Q3 2020 deals).

  • Methodology: SRS Acquiom analyzed more than 1,400 private-target acquisitions, representing over $285 billion in value, that it worked on between 2016 and 2020. Most of the deals and their terms were not publicly reported.

Look ahead: The question moving forward is how much, if any, of this structural shift outlasts the virus.

Go deeper

Ina Fried, author of Login
6 mins ago - Technology

The feds' dangerous data-grab game

Illustration: Sarah Grillo/Axios

Recent revelations about Trump-era data grabs by federal authorities have put the U.S. in a tricky spot as it competes with China to lead the digital age.

The assumption in the West is that U.S. tech companies only provide the government with data when it follows the rules and goes after specific suspects — while, in China, tech companies are forced to share everything with the government.

36 mins ago - Health

The Obamacare wars end in a whimper

Illustration: Shoshana Gordon/Axios

Existential threats to the Affordable Care Act just aren’t what they used to be.

The big picture: The anti-Obamacare fire on the right may not be fully extinguished — it still throws off some smoke and a few sparks every once in a while — but it has petered out into irrelevance, dismissed as a distraction even by some of the same conservatives who helped to stoke it in the first place.

Health care ruling saves Republicans from themselves

Illustration: Aïda Amer/Axios

The Supreme Court saved the health care system from imploding Thursday by dismissing a Republican challenge to the Affordable Care Act. But it also saved the GOP itself from another round of intraparty chaos.

Why it matters: Most GOP lawmakers privately admit (and some will even say publicly) they don't want to deal with health care again. The issue generally isn't a good one for them with voters — as they learned the hard way after they failed to repeal the ACA in 2017.

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