Representations and disclosure schedules
Representations and warranties describe the business as the seller presents it, covering areas such as financial statements, contracts, compliance, employees, and litigation. The disclosure schedules qualify those statements by listing exceptions, and careful scheduling is often the seller's most effective protection. Knowledge and materiality qualifiers narrow representations, and buyers frequently push back on them. Some agreements include a materiality scrape that disregards those qualifiers for indemnification purposes. Buyers should connect diligence findings to specific representations rather than rely on general statements. Sellers often resist broad representations about compliance or undisclosed liabilities, since those tend to generate the most claims after closing.
Indemnification and insurance
Indemnification provisions set caps, baskets, and survival periods for claims, and fundamental representations often receive longer survival and higher caps. Fraud is typically carved out of limits, though the definition of fraud may be negotiated. Representations and warranties insurance has become common in many deals and can shift much of the risk from the seller to an insurer, which changes how hard each side negotiates indemnity terms. Escrows or holdbacks may secure indemnity obligations. Buyers should understand what the policy excludes, especially known issues discovered in diligence. Caps and baskets interact, so the way they are drafted together often matters more than either figure on its own.
Negotiating priorities
When we review an M&A agreement draft, we first identify the risks that matter most to you and which you can accept, since negotiating every clause tends to stall a deal. We compare the draft to the letter of intent and flag departures. We also review the definitions, because many disputes turn on definitions of losses, material adverse effect, or knowledge. The result is a focused list of priorities that keeps the deal moving while protecting your key interests. Where the deal carves a business out of a larger company, we pay particular attention to transition services and shared contracts, which the main agreement often leaves to side documents.
