Sandbagging Provisions
Published by Bloomberg LawMarket Trends: What You Need to Know “Sandbagging” concepts are often the subject of intense negotiation in M&A transactions. Inclusion of pro-sandbagging clauses within M&A purchase agreements has been on the decline, and more often, the parties are deciding instead to be silent on the issue of sandbagging. Introduction...
Stand-Alone Indemnities
Published by Bloomberg LawMarket Trends: What You Need to Know According to the American Bar Association's eight Private Target Mergers and Acquisitions Deal Point Studies, the use of stand-alone indemnities in reported private company M&A transactions has increased from 69% in its 2007 study to 95% in 2019. This article examines the...
Target Counsel Legal Opinions
Published by Bloomberg LawMarket Trends: What You Need to Know One of the most pronounced practice-related trends in private company merger and acquisition transactions is the near-disappearance of target legal opinions as a closing deliverable. Though they were not long ago a common closing condition, target legal opinions have pretty much gone...
The ‘Materiality Scrape’ Provision
Published by Bloomberg LawMarket Trends: What You Need to Know Over the past almost 15 years covered by the ABA studies, materiality scrapes have morphed from being a somewhat uncommon provision, seen in about 14% of transactions in 2005, to something near-ubiquitous in M&A purchase agreements, now included in 93% of transactions...
Trends in M&A Provisions: Disclosure Schedule Updating
Published by Bloomberg LawMarket Trends: What You Need to Know Over the past several years, an express right, or obligation, of sellers to update disclosure schedules between signing and closing is becoming less common. Instead, more M&A agreements are staying silent on the point. In addition, where disclosure schedule updating is contemplated...
Evolving Private Company M&A Considerations in the COVID-19 Era
Introduction The virus that causes COVID-19 has ushered in unprecedented times for our country and our global community. Certainly, the pandemic is impacting the way M&A transactions are looked at, papered, implemented, and even priced. This article identifies some of the higher-level, pandemic-related considerations evolving in the private company...
COVID Impact as a Standalone Indemnity in M&A Transactions
Introduction The COVID virus has ushered in unprecedented and challenging times for our country and the global community. From the deeply personal pain and suffering caused by the virus as a health pandemic to behavioral adjustments in the consumer population at large (“social distancing,” etc.), to every day, but very...
COVID and M&A Earnouts
The COVID-19 virus has ushered in unprecedented and challenging times for our country and our global community. From the deeply personal pain and suffering caused by the virus as a health pandemic to behavioral adjustments in the consumer population at large (“social distancing,” etc.), to our everyday routines, burdens...
Crain's Ask the Expert: Exploring the M&A Landscape
Click Here to View the Original PDF from Crain's New York 2019 was a busy year in the mergers and acquisitions world, with both private equity firms and strategic buyers looking for deals in an environment shaped by tax reform, a looser regulatory climate and increased cash reserves at...
A Toolkit for Directors & Officers of US Companies Amid COVID-19
The current COVID-19 crisis has rapidly re-shaped everyday life around the world, and our understanding of the impact this disruption to daily interactions and routines has had on business is constantly evolving. While much attention has been given to the effects on the economy and the stock markets, as...
M&A Trends: COVID-19 As A Material Adverse Change
As COVID-19 has proliferated throughout the United States, the resulting health-related government actions - in the form of school and business closures, emergency declarations, shelter in place requirements and the like - along with the behavioral adjustments in the consumer population at large (“social distancing,” etc.) continue to have...
Ten Things You Need to Know About Force Majeure Now
In the social and economic fallout from the Coronavirus, businesses are assessing how best to address their commercial relationships, especially where potentially insurmountable barriers to performance loom large. One clause that concerns performance impossibility has gained increasing recognition in this crisis. “Force majeure” contract clauses long have existed in...
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...
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