June 19, 2019
Legal M&A resource website deallawyer.com has pulled excerpts from our M&A team’s piece “Will your indemnity survive the apocalypse?”.
The deallawyer.com piece focuses on the review for the “the maximum periods that reps can survive under the laws of jurisdictions including Delaware, New York and Ontario.”
It finishes, saying “paying close attention to the governing law clause of the agreement” isn’t always enough. It quotes the following from the original piece.
No matter the rigor of pre-signing due diligence efforts, once the dust has settled post-signing, buyers tend to be faced with one surprise or another about their newly acquired business no matter the rigor of pre-signing due diligence efforts. Buyers routinely negotiate for protections to address these circumstances, including comprehensive representations and warranties, indemnification clauses and purchase price escrows or holdbacks.
However, in some instances, events may transpire between the signing of the purchase agreement and the closing of the transaction that go beyond a mere surprise and have the effect of so negatively impacting the target business that a buyer may wish to walk away from the transaction. In such cases, a buyer will typically only be able successfully abandon a transaction if it can demonstrate that the target has experienced a material adverse change, and key to doing that is the question: what is “material”?
The original piece was written by Laurie Duke, Andrew Gray, David Wawro, Justin Crawford and Sophie Courtois and is a part of the Transaction Tips series. Learn more about Torys’ M&A work by visiting the practice page.