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Venture Briefing:  Buying or Selling? Rep and Warranty Insurance Could Be the Answer Venture Briefing:  Buying or Selling? Rep and Warranty Insurance Could Be the Answer

Venture Briefing: Buying or Selling? Rep and Warranty Insurance Could Be the Answer

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Default Rates Much Higher for Largest Buyouts
The average default rate for the past six years of some of the largest buyouts in the U.S. is nearly three times as high as similarly rated non-buyout backed companies, according to new data from Moody's Investors Services. Five of 10 megadeals analyzed by Moody's, each with more than $10 billion of debt, have defaulted.
(Source: The Wall Street Journal, 2014-06-19) Read the full article
More Companies Planning to Offer IPOs to Everyday Investors
Once exclusively for big institutions and large investors, initial public offerings are starting to be somewhat more democratized. Some companies planning to go public are opting to include employees, fans and customers in their IPO, giving them access to shares at the same time and same price as Wall Street.
(Source: CNBC, 2014-06-16) Read the full article
Report Claims 'Patent Trolls' Adversely Impacting V.C. Industry
Adding to studies on the impact of "patent trolls," a new report commissioned by the Computer & Communications Industry Association says they lower venture capital investments. Without the activity of "trolls," also known as patent assertion entities, venture capital investment would have grown by at least $8.1 billion over five years, according to a report by MIT professor Catherine Tucker.
(Source: Roll Call, 2014-06-13) Read the full article
House Approves Permanent Extension of Small Business Tax Break
The House voted to make permanent a generous tax break that makes it easier for small businesses to buy new equipment and improve their property, part of an election-year showdown over a series of expired tax breaks worth billions. The tax break allows business owners to more quickly write off the costs of computers, machinery and other equipment, as well as improvements to retail property.
(Source: Inc., 2014-06-13) Read the full article
SBA Ups Size Standards, Allowing 8,400 Firms to Become Small Biz
More than an additional 8,400 businesses will become eligible for Small Business Administration loans and government contracting programs for small companies as a result of the agency updating its size standards for inflation. This is the first update for inflation in the size standards for these industries since 2008.
(Source: The (Albany) Business Review, 2014-06-13) Read the full article
Venture Capitalists Showering Digital Health Start-Ups With Funds
Venture capitalists are pouring more money than ever before into digital health start-ups, more than $2 billion so far this year alone, according to the venture capital firm Rock Health. They are betting that entrepreneurs can help doctors, hospitals and insurers become leaner -- which the Affordable Care Act strongly encourages.
(Source: Kaiser Health News, 2014-06-16) Read the full article
Small Businesses Finding Banks More Willing to Lend
Banks are making it easier for small businesses to get loans, and they're giving companies better terms and lower interest rates. Forty-four percent of the small businesses surveyed last month said they received bank loans during the previous three months.
(Source: ABC News, 2014-06-18) Read the full article
Start-ups Doing More to Make Sure Board Members Are Professionals
Startup executives are becoming more careful about how they select board members as they discover the drawbacks of simply naming their friends and acquaintances to these positions. They are hiring executive search firms to help them find better qualified candidates, paying cash and perhaps consulting fees in addition to equity, and in some cases requiring that board members invest some of their own money to demonstrate their commitment.
(Source: The Wall Street Journal, 2014-06-10) Read the full article
Big Business Lobbies to Shift Legal Fees to Shareholders
Big business is lobbying Delaware lawmakers for corporate bylaws to shift legal fees to shareholders who sue and lose, which legal experts said could curtail a booming type of investor class actions. An affiliate of the U.S. Chamber of Commerce urged the Delaware General Assembly to defeat a bill in the state's legislature that would bar "loser pays" corporate bylaws.
(Source: Reuters, 2014-06-10) Read the full article
Buying or Selling? Rep and Warranty Insurance Could Be the Answer


Brent Showalter

Historically, insurance covering representations and warranties in merger and acquisition transactions (Rep and Warranty Insurance) has been viewed as prohibitively expensive and has not been regularly used. However, in recent years, the use of Rep and Warranty Insurance has become more common, due in part to more insurers providing a broader array of insurance products, decreases in premiums, shortening of the time period required to obtain the policy, and increases in competition to acquire attractive companies. Read full article online.


By The Numbers

According to PitchBook data, debt levels sat at roughly 55% in 1Q 2013, down from 63% in 4Q 2013, and the median EBITDA multiple in 1Q 2014 was 7.2x.
Source – PitchBook Global PE Deal Multiples & Trends Report


Services Group

Ice Miller has been one of the most active law firms in the private equity industry over the last decade, representing both entrepreneurs building great companies and the private equity firms and individuals that invest in them. We have extensive experience with all types of funds (formations and operations); mezzanine and senior secured financing; leveraged buyouts, roll-ups, build-ups, and consolidations; divestitures and exits; and complex litigation on behalf of investors and privately financed companies. In addition, over the past 10 years, Ice Miller has represented hundreds of emerging growth businesses in various industries on such matters as entity formation, capitalization, capital raising, alternative financing, intellectual property rights and protection, growth and exit strategies, corporate governance, tax matters, and many other legal issues that are critical to the growth and success of an emerging company.

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This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.

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