M&A Boot Camp booklet 2023 - Flipbook - Page 41
4.
5.
6.
B.
Parties standing behind the representations and warranties
a.
All stockholders of the target company vs. less than all
stockholders of the target company
b.
“Joint and several” liability vs. “proportionate” liability
Disclosure schedules
a.
Contain extensive information on the target company’s business;
identify exceptions to the representations and warranties
b.
Must he prepared, thoroughly reviewed by the acquirer and
finalized before the acquisition agreement is signed
Negotiated limitations on representations and warranties and related
indemnification obligations
a.
Materiality qualifications
b.
“Knowledge” qualifications
–
actual vs. “constructive” knowledge
–
individuals whose knowledge is to be imputed to
the target company
c.
Limitation on period of survival of representations and warranties
d.
“Basket” (deductible) or threshold
e.
Ceiling on liability
f.
Certain categories of damages not subject to indemnification (such
as “consequential” damages)
g.
Other limitations
7.
Security for performance of indemnification obligations – “hold back” or
escrow of a portion of the purchase price; “set off” rights
8.
Control of defense of third-party claims with respect to which the acquirer
may seek indemnification
9.
Subrogation rights of indemnifying parties
Acquirer’s representations and warranties – very limited in scope, if the entire
purchase price is to be paid in cash at the closing; however, may be extensive if
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