Contractual Indemnity in M&A Deals: Transactional and Litigation Considerations, Terms to Minimize Financial Risks

Description

Indemnification provisions are standard clauses in M&A contracts that help parties minimize financial loss if a deal goes south. Counsel negotiating indemnification terms must consider time, subject matter, dollar limitations, escrowed funds, setoff rights, and indemnification payment. The risks of boilerplate provisions far offset the convenience.

Indemnity clauses are challenging to negotiate. The seller usually seeks to limit its indemnification liability while the buyer wants as much indemnification protection as possible.

Deal counsel must ensure that the indemnity provisions clearly describe the appropriate coverages and limitations and are properly coordinated with other agreement provisions. Deal counsel must also make sure that the indemnity provisions are enforceable against the seller's stockholders.

Counsel should also consider how damages will be determined in the event of a breach. Further, deal attorneys should evaluate and advise their clients on the benefits but also the shortfalls with respect to purchasing insurance products to supplement or replace indemnity provisions.

Listen as our authoritative panel of deal attorneys explains current trends in negotiating indemnification provisions in M&A contracts. The panel will discuss strategies for limiting or expanding indemnification liability and enforcing indemnity clauses, including determining damages. The panel will also explain how insurance products are being used to cover indemnities.