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Robert Tunheim
Robert Tunheim, Ballard Spahr

The POWER 30: Robert Tunheim

For mergers and acquisitions lawyers, business in 2022 was a little spottier, said Robert Tunheim. Another way to say that is that it was not as crazy, he said. It’s not so much that there are fewer deals but they are taking longer.

“We’re kind of at that awkward point where sellers want 2021 prices, but buyers are more concerned. There’s a different set of expectations,” he said.

“My perspective is this: There is still kind of an economics 101 supply and demand in play. Private equity has cash to spend, with more demand than a supply of good companies; we’re still going to have a decent year. If we’re off a bit from 2021 it still will be good,” he said.

Private equity, which is important in the M&A market, is looking to raise money, charge a management fee for a fixed period of time, and invest it. After that limited time, their management fees are based on the investments made, Tunheim said. Hence the interest in buying.

Tunheim sees private equity as a good thing. In the 1990s after Enron collapsed, there was less interest in the stock market and more regulations, which spurred private equity growth.

“It’s been a good investment for partners, they get capital gains treatment for carried interest. It’s also a wonderful source of liquidity and provides a nice exit ramp for entrepreneurs,” he said. It also gives owners a way to grow their company with someone else’s money, he said. “It’s a wonderful source of equity for the market.”

Also a good thing for M&A is rep and warranty insurance, Tunheim continued. The insurance pays buyers if there is a problem with the sale based on the seller.

Discussion at a recent deal-making conference by the firm showed that about 20% of deals result in rep and warranty insurance claims, which did not surprise him.

Tunheim agreed with other Power 30 attorneys about the importance of making sure the corporate cultures are going to mesh. A merger or acquisition without that  is a recipe for disaster, he said.