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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
59 mins ago - Technology

Microsoft to buy Activision Blizzard

Photo: Jakub Porzycki/NurPhoto via Getty Images

Microsoft announced Tuesday it plans to acquire video game giant Activision Blizzard for $68.7 billion in cash.

Why it matters: The move comes as Activision Blizzard has faced a wave of accusations of workplace harassment.

2 hours ago - World

Blinken to visit Ukraine as Russia invasion threat looms

Blinken (R) with President Zelensky. Photo: Efrem Lukatsky/Pool via Getty

Secretary of State Antony Tony Blinken will travel to Ukraine on Tuesday as the country faces an ongoing threat of Russian invasion.

Driving the news: Blinken will meet with Ukrainian President Volodymyr Zelensky and Foreign Minister Dmytro Kuleba, as well as officials at the U.S. embassy in Kyiv to discuss contingency planning. He'll then travel to Berlin to meet German Foreign Minister Annalena Baerbock and attend a meeting of the "Transatlantic Quad" — France, Germany, the U.K. and U.S.

Updated 2 hours ago - World

At least 3 dead after Tonga volcano eruption and tsunami

A satellite image of the explosive eruption of the Hunga Tonga-Hunga Ha'apai volcano on Saturday. Photo: UNICEF/NOAA

At least three people are confirmed to have died in Tonga following the undersea volcanic eruption that sent tsunami waves toward the island nation and across the Pacific over the weekend, officials said Tuesday.

The big picture: Officials reported major damage along the western coast of the main island of Tongatapu, where the capital, Nuku'alofa, was covered in ash and dust, including on the runway of the airport. Officials in Tonga confirmed three deaths in the country's first official statement since the crisis began.

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