We have seen a decrease in the number of competitive sale processes in 2019 in favor of bilateral transactions. There are more and more deals which become bilateral after the first or the second round of an auction.
But why do deals fall apart? Mostly because of price expectations. In our experience, the gap in meeting ever-rising multiples was even bigger in case of sales from private equities to private equities than in case of sales to strategics.
However, if price expectations do align, one of the biggest challenges is related to regulatory clearances. And here, foreign investment control has become one of the top priorities. In Romania this translates into the saying of the Supreme Council for State Defense in a broad range of transactions.
Another trend that we have seen is that the market is slightly moving into a more buyer friendly environment. And this translates into various limitations of liability bouncing back to a more balanced level, warranty repetition, known-issue indemnities and material adverse change clauses.
And last but not least, we have seen an increase in the warranty and indemnity insurance even outside of private equity deals and sometimes even with limited skin in the game for the sellers. As a consequence, we have seen a decrease in the escrows used to secure post completion warranty and indemnity claims.