The Sandbagging Conundrum Explained
There is perhaps no more consistently vexing problem for transactional attorneys on opposite sides than figuring out a fair contractual resolution for “sandbagging” issues. Sandbagging typically occurs when the buyer of a business learns that a seller will be in breach of a contractual representation when the deal closes...
Trends in M&A Provisions: Indemnity Caps
In merger and acquisition (“M&A”) transactions, the definitive purchase agreement (whether asset purchase agreement, stock purchase agreement, or merger agreement) typically contains representations and warranties made by the seller with respect to the target company. [i] The scope and detail of these representations and warranties are often heavily negotiated...
Trends in M&A Provisions: After-Tax Indemnity Limitations
In merger and acquisition (“M&A”) transactions, the definitive purchase agreement (whether asset purchase agreement, stock purchase agreement, or merger agreement) typically contains representations, warranties, and covenants, along with related indemnification obligations. [2] One issue often negotiated is whether the amounts recoverable as indemnified damages should be calculated on an...
Trends in M&A Transactions: Separate Escrows for Purchase Price Adjustments
In mergers and acquisitions (“M&A”) transactions, the definitive purchase agreement (whether asset purchase agreement, stock purchase agreement, or merger agreement) typically contains provisions for post-closing purchase price adjustments . [2] Generally, these adjustments are intended to reconcile changes in the target’s financial condition as of the transaction’s closing (usually...
Trends in M&A Provisions: Earnout Provisions
In merger and acquisition (“M&A”) purchase agreements (whether asset purchase agreement, stock purchase agreement, or merger agreement), provisions addressing the purchase price, and how it is to be paid, are, understandably, amongst the most critical to get right. The price to be paid to acquire the target [1] can...
Trends in M&A Provisions: Alternative Dispute Resolutions Provisions
In merger and acquisition (“M&A”) transactions, the definitive purchase agreement (whether asset purchase agreement, stock purchase agreement, or merger agreement) typically contains representations, warranties, and covenants, along with related indemnification obligations. The purchase agreement may also stipulate certain agreed upon non-judicial means for dealing with claims under the agreement...
Trends in M&A Provisions: Exclusion of Consequential Damages
In merger and acquisition (“M&A”) transactions, the definitive purchase agreement (whether asset purchase agreement, stock purchase agreement, or merger agreement) typically contains representations and warranties and related indemnification covenants. [2] Buyers and sellers often negotiate the scope and types of damages subject to indemnification under the purchase agreement, including...
Trends in M&A Provisions: Insurance Reduction Provisions
In merger and acquisition (“M&A”) transactions, the definitive purchase agreement (whether asset purchase agreement, stock purchase agreement, or merger agreement) typically contains representations, warranties, and covenants, along with related indemnification obligations. [2] One common limitation to the parties’ indemnification obligations seeks to reduce the amount that the indemnified party may...
Trends in M&A Provisions: Express Non-Reliance Provisions
In merger and acquisition (“M&A”) transactions, the definitive purchase agreement (whether asset purchase agreement, stock purchase agreement, or merger agreement) typically contains representations, warranties, and covenants, along with related indemnification obligations. An M&A purchase agreement includes representations from the seller to the buyer and the buyer to the seller. [ii] However...
Trends in M&A Transactions: Use of Knowledge Qualifiers for Representations and Warranties
In merger and acquisition ("M&A") transactions, the definitive purchase agreement typically contains representations and warranties made by the seller with respect to the target company. [ii] The scope and detail of these representations and warranties are often heavily negotiated and tailored to reflect both the nature of the target and...
Trends in M&A Provisions: Waiver of Jury Trials
Jury Trial Waiver Provisions The Seventh Amendment of the U.S. Constitution guarantees the right to a jury trial for civil litigants in federal court. Most waivers of constitutional rights at the federal level must be knowing, voluntary, and intelligent. [2] In applying this standard, as it pertains to a jury...
Trends in M&A Provisions: Financial Statement Representations
U.S.-based merger and acquisition (“M&A”) agreements (whether asset purchase agreement, stock purchase agreement, or merger agreement) typically contain a seller representation relating to the target company’s financial statements. [2] This article examines trends in financial statement representations in private company M&A transactions, as reflected in the ABA studies. [3] Scope...
Trends in M&A Provisions: Compliance with Laws Representations
In merger and acquisition (“M&A”) transactions, the definitive purchase agreement (whether asset purchase agreement, stock purchase agreement, or merger agreement) typically contains representations, warranties, and covenants, along with related indemnification obligations. One common representation that the seller gives [ii] is that the target has operated its business in accordance with...
Trends in M&A Provisions: Damage Mitigation Provisions
In merger and acquisition (“M&A”) transactions, the definitive purchase agreement (whether asset purchase agreement, stock purchase agreement, or merger agreement) typically contains representations, warranties, and covenants, along with related indemnification obligations. The scope of the parties’ respective indemnification obligations is usually among the most heavily and intensely negotiated portions...
Trends in M&A Provisions: No Undisclosed Liabilities Representations
In merger and acquisition (“M&A”) transactions, the definitive purchase agreement contains representations and warranties made by the seller with respect to the target company.[1] The scope and detail of these representations and warranties are often heavily negotiated and tailored to reflect not only the nature of the target and...
Trends in M&A Provisions: Indemnification as an Exclusive Remedy
In merger and acquisition (“M&A”) transactions, the definitive purchase agreement (whether asset purchase agreement, stock purchase agreement, or merger agreement) typically contains representations and warranties made by the seller with respect to the target company. [2] The scope and detail of these representations and warranties are often heavily negotiated and...
Trends in M&A Provisions: Disclosure Schedule Updating
Disclosure schedules are a common component of an M&A purchase agreement (whether a stock purchase agreement, asset purchase agreement, or merger agreement). The disclosure schedules provide fact-specific disclosures (or exceptions to specific statements) relating to the representations and warranties. [2] As such, disclosure schedules are an integral part of the...
Trends in M&A Provisions: Sandbagging and Anti-Sandbagging Provisions
A “sandbagging” provision (sometimes referred to as a “pro-sandbagging” provision) in an M&A agreement (asset purchase agreement, stock purchase agreement, or merger agreement) states that a buyer’s remedies against the seller under the agreement are not impacted regardless of whether the buyer had knowledge, at or prior to closing...
Trends in Private Counsel M&A Transactions: Target Counsel Legal Opinions
In all types of business transactions, the parties rely heavily on their own counsel to negotiate business and legal points, and to draft the transaction documentation to reflect the agreed upon terms. In addition to relying on due diligence on the representations and warranties contained in the transaction document...
Trends in Private Company M&A Transactions: “10b-5 Representations”
In merger and acquisition (“M&A”) transactions, the definitive purchase agreement (e.g., asset purchase agreement, stock purchase agreement, or merger agreement) typically contains representations and warranties that the seller makes with respect to the target company.[2] The scope and detail of these representations and warranties are often heavily negotiated and tailored...
Trends in M&A Provisions: Stand-alone Indemnities
In private company mergers and acquisitions (“M&A”) transactions, the indemnification provisions of a definitive purchase agreement (whether asset purchase agreement, stock purchase agreement, or merger agreement) stand out in importance for both buyers and sellers. [ii] Standard indemnification provisions in M&A purchase agreements typically provide that the “indemnitor” (the party...
Trends in Private Company M&A Provisions: The “Materiality Scrape”
In terms of apportioning responsibility for a target company’s liabilities as between buyer and seller in an M&A transaction, a “materiality scrape” can be one of the most important provisions within the transaction documents. And yet this provision?and its significance to the overall risk profile of an M&A transaction?is often not fully...