Basics In M&A: Indemnification Provisions

Appeared in Law360 on March 18, 2016. Originally appeared in Kaye Scholer's Spring 2016 M&A and Corporate Governance Newsletter. 

In an M&A transaction, once the money has changed hands and the deal has closed, who should bear the burden when an unexpected liability occurs? Generally, the sellers desire to walk away from the transaction with the full benefit of the negotiated purchase price and minimal future liabilities related to the business or the asset that they sold. The buyer, by contrast, would like to minimize its liability for issues that arose under the watch of the previous owners and for damages arising from inaccuracies in how the business or asset was described during the negotiation.