Negotiating the Indemnity Package in a Deal: A Practical Guide

Document type: Guide Practice area: Business and Corporate — Mergers and Acquisitions Jurisdiction: United States (Delaware emphasis) Last reviewed: 5 September 2026

Deal lawyers negotiate the indemnity article in a particular order, and it is not the order in which the article appears in the agreement. The order is: what did diligence find, who bears unknown risk, how much is set aside, and only then survival, baskets, and caps.

Reversing that order — starting with the escrow percentage — produces the negotiation everyone dreads: two sides trading numbers with no theory about what the numbers are for.

This guide follows the order that works.

PART ONE — BEFORE THE AGREEMENT

Step 1: Get the indemnity architecture into the letter of intent

The single highest-leverage moment in the negotiation is the LOI, because leverage is highest before exclusivity and lowest afterward.

Seller-side: put these in the LOI.

• Whether representation and warranty insurance will be used, and who pays the premium.
• The escrow or holdback percentage.
• The survival period.
• The cap for operational representations.
• That the escrow is the exclusive recourse for operational representations, if that is the ask.
• That indemnification is the exclusive remedy, subject to fraud.

Buyer-side: put these in the LOI.

• That indemnification will be provided on customary terms, without conceding the numbers.
• That specific diligence findings will be addressed by special indemnities outside the general package.
• That the purchase price adjustment is separate from indemnification.
• That the LOI's indemnity terms assume nothing material adverse emerges in diligence.

Why sellers should insist on specificity and buyers should resist it. Once exclusivity begins, the seller has no alternative and the buyer knows it. Every material indemnity term left open in the LOI will be resolved closer to the buyer's position than it would have been at signing of the LOI.

A note on process. In a competitive auction, the seller's counsel typically issues a draft agreement with a seller-friendly indemnity package and asks bidders to mark it up. The markup is the bid on these terms, and a seller comparing bids should price the indemnity differences explicitly. A $100 million bid with a 1 percent escrow is worth more than a $103 million bid with a 12 percent escrow held for two years — and sellers routinely fail to do that arithmetic.

Step 2: Run diligence to find the things that need special indemnities

Diligence has two purposes: deciding whether to buy, and identifying which risks need to be priced separately.

The categories that most often become special indemnities:

• Tax: nexus and sales-and-use exposure, transfer pricing, unclaimed property, worker classification for employment tax.
• Employment: wage-and-hour classification, independent contractor status, unpaid overtime, immigration compliance.
• Environmental: known contamination, pending remediation, permit non-compliance.
• Intellectual property: open source license contamination, employee assignment gaps, disputed ownership, expired or unrecorded assignments.
• Regulatory: pending investigations, known violations, licensure gaps.
• Contracts: change-of-control provisions that require consent, disputed receivables, customer concentration with a wobbly relationship.
• Data and privacy: known incidents, consent gaps, cross-border transfer issues.

The rule: anything diligence identifies as a specific, quantifiable risk should be priced — through a purchase price reduction, a special indemnity, or an excluded liability — not left to the general indemnity. It will be excluded from any RWI policy in any event.

Step 3: Decide on insurance early

RWI is now the default in most middle-market and larger private deals, and the decision affects everything else.

Start four to six weeks before signing. The sequence: broker engaged, non-binding indications in three to five days, insurer selected, underwriting fee paid, diligence reports and the draft agreement delivered, underwriting call, policy negotiated in parallel with the agreement.

Typical economics: limits at 10 percent of enterprise value; premium 2.5 to 4 percent of the limit; retention 0.5 to 1 percent of enterprise value, often dropping by half after twelve months; a small escrow funding part of the retention.

Who pays. The buyer, usually, though in competitive processes the cost is effectively shared through price. The retention escrow is commonly split.

What underwriting will demand. Complete diligence reports covering the represented areas. Gaps become exclusions. If the buyer did not do IP diligence, the IP representations will not be covered.

When to skip it. Deals below roughly $20 million; industries insurers avoid; and deals where diligence is too thin to underwrite.

PART TWO — THE REPRESENTATIONS

Step 4: Build the representation set to match the business

The standard set is a starting point, not an answer.

Add representations where the business has specific risk:

• A software company: open source usage and license compliance; employee and contractor IP assignments; customer data processing; SOC 2 or equivalent status.
• A manufacturer: product liability history and recalls; environmental permits and releases; supplier concentration; warranty reserves.
• A healthcare business: billing and coding compliance; exclusion screening; HIPAA; Stark and anti-kickback.
• A consumer business: advertising substantiation; automatic renewal compliance; state consumer protection.
• Anything with international operations: export controls, sanctions, and anti-corruption.

Delete representations that do not apply. A representation set full of inapplicable provisions dilutes attention and produces meaningless schedule entries.

Step 5: Negotiate the qualifiers as a package

For the seller:

• Push materiality qualifiers onto the compliance and contract representations.
• Define "Knowledge" as actual knowledge of a short, named list of individuals — three to six is typical — after reasonable inquiry.
• Negotiate dollar thresholds for the list-based representations (contracts, litigation, permits) that reflect the size of the business.
• Resist the 10b-5 catch-all representation.

For the buyer:

• Accept materiality on compliance representations, resist it on financial statements, capitalization, and title.
• Accept a named-individual knowledge definition, insist on "after reasonable inquiry."
• Keep thresholds low enough that the schedules are actually informative.
• Ask for the catch-all, and trade it for something.

And then apply the scrape. With a damages-only materiality scrape, the seller's materiality qualifiers do their intended work — screening out non-material breaches — without also cutting the buyer's recovery on breaches that clear the threshold. This is the standard compromise for a reason.

Step 6: Build the disclosure schedules properly

This is where the seller's team spends the most hours and where post-closing disputes most often originate.

Process:

• Start early. Schedules take three to six weeks for a business of any size. Beginning them the week before signing guarantees errors.
• One owner. A single person maps each representation to the responsible business function and tracks completion.
• Business people draft the substance, lawyers edit for scope and consistency.
• Cross-reference generously. A fact qualifying four representations goes under all four.
• Describe facts, not documents. "See folder 4.12" is not disclosure.
• Do not over-disclose. A schedule listing every contract obscures the material ones.
• Version control with dates. Keep a signed, dated set at signing and at closing.

The general disclosure provision. Negotiate it deliberately: whether cross-qualification requires relevance to be apparent on the face of the disclosure, or merely "reasonably apparent." This one sentence decides a meaningful share of post-closing disputes.

The update right. Whether the seller may update the schedules between signing and closing, and whether an update cures a breach or merely informs the buyer, is the most consequential term in the schedules. A curative update transfers all interim risk to the buyer. The common compromise: updates are permitted, they do not cure a breach for indemnification purposes, but a matter disclosed by update does not give the buyer a walk right unless it would constitute a material adverse effect.

PART THREE — THE SIX TERMS

Step 7: Survival

The drafting trap. Specify whether a claim survives on notice or requires suit filed within the period. A provision requiring suit is a real trap for a buyer negotiating in good faith on the final day. The workable middle: notice within the survival period, suit within a further six to twelve months.

Where insurance is used, the contractual survival for operational representations can be short because the policy runs three years or more. Sellers should point this out; buyers accept it because their real protection is the policy.

Step 8: The basket

Deductible versus tipping is the first question and it is worth real money.

• Deductible: seller pays only the excess. Standard in insured deals and increasingly the norm generally.
• Tipping: seller pays from dollar one once the threshold is crossed. Buyer-favorable; increasingly rare above the lower middle market.
• Hybrid: deductible with a tip at a higher figure. A workable compromise where the parties are far apart.

Size: 0.5 to 1.0 percent of purchase price. Larger deals trend lower as a percentage.

The de minimis. 0.05 to 0.1 percent of purchase price per claim, with related claims aggregated. Without it, hundreds of trivial items reach the basket.

Carve-outs from the basket. Fundamental representations, fraud, special indemnities, and the purchase price adjustment should all be dollar-one.

Step 9: The cap

The overall cap. Even where fundamental representations are capped at the purchase price, add a provision that no individual seller pays more than the proceeds it actually received. Founders selling alongside a fund care about this a great deal.

Several, not joint. Where there are multiple sellers, liability should be several and pro rata to proceeds, not joint. A founder with 4 percent of the equity should not be exposed to 100 percent of a claim.

Step 10: The escrow

• Traditional: 5–15 percent, held 12–24 months.
• Insured: 0.5–1 percent, held 12 months, funding part of the retention.
• Release mechanics: either a single release at the end of the survival period, or a partial release at 12 months with the remainder held to the end. Pending claims hold back the claimed amount.
• Escrow agent and fees: name the agent; split the fee; specify the investment of funds and who gets the interest (usually the sellers, taxed to them).
• Sellers' representative: appoint one, with authority to act for all sellers on claims, releases, and disputes, plus an expense fund and an indemnity from the sellers.

Exclusive recourse to the escrow is a distinct concept from a cap. A cap of 10 percent with recourse beyond the escrow means the buyer can sue the sellers personally for the difference. Sellers should ask for exclusive recourse; buyers should concede it only where the escrow is meaningful or insurance covers the gap.

Step 11: Exclusive remedy and the fraud carve-out

The exclusive remedy provision should exclude common law claims and be subject to carve-outs for: fraud (as defined), specific performance and injunctive relief, the purchase price adjustment, and any claim under a separate agreement such as a non-compete or a transition services agreement.

Define fraud. This is the most important sentence in the article.

"Fraud" means an actual and intentional misrepresentation of a
fact expressly set forth in [Article III / Article IV] of this
Agreement, made by [the Company / Seller] with actual knowledge
that such representation was false when made, with the intent to
induce [Buyer] to enter into this Agreement, and upon which
[Buyer] actually and justifiably relied to its detriment.
"Fraud" does not include constructive fraud, equitable fraud,
promissory fraud, unfair dealings fraud, negligent
misrepresentation, or any claim based on recklessness or on any
statement not expressly set forth in this Agreement.

Pair it with a full anti-reliance provision.

Buyer acknowledges that neither the Company, Seller, nor any
other Person has made any representation or warranty, express or
implied, as to the Company or the accuracy or completeness of
any information furnished, except for the representations
expressly set forth in Article [__]. Buyer has not relied on,
and disclaims reliance on, any other representation, warranty,
statement, projection, forecast, estimate, or information,
whether made in a data room, a management presentation, or
otherwise.

Why this pairing works. ABRY Partners V, L.P. v. F & W Acquisition LLC, 891 A.2d 1032 (Del. Ch. 2006) holds that a seller may contractually limit its exposure for representations it did not know were false, and that a buyer may effectively disclaim reliance on extra-contractual statements — but that Delaware will not enforce a provision immunizing a seller from a claim that it knowingly lied in the agreement itself. The definition above and the anti-reliance provision take everything the law permits and do not attempt what it forbids.

Step 12: Sandbagging

Say what you mean. Silence leaves the question to the governing law, and the governing law varies. Delaware's disposition — enforcing the contract as written, reflected in cases such as Eagle Industries, Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228 (Del. 1997) — generally supports recovery notwithstanding buyer knowledge; New York's case law is less settled.

The better negotiation. Rather than fighting over the clause, deal with the actual problem: if diligence found something, price it. A special indemnity, a price reduction, or an excluded liability resolves the issue on terms both sides understand. The sandbagging clause matters only for things nobody knew about at signing but the buyer's team happened to learn — a narrow set.

PART FOUR — THE OTHER MONEY TERMS

Step 13: The purchase price adjustment

Set the target from real data. Compute the target working capital from a trailing twelve-month average of the monthly balance sheets, normalized for seasonality, using the same methodology that will be used at closing.

Attach a sample calculation. This is the single most effective dispute-prevention device in the agreement.

Specify the accounting hierarchy. The order should be: (1) the specific accounting methodologies set out in the exhibit; (2) the company's historical accounting practices; (3) GAAP. Without a hierarchy, both sides argue their preferred layer.

Define the dispute mechanism. An independent accounting firm, acting as an expert and not as an arbitrator, deciding only the disputed items, within the range of the parties' respective positions, with fees allocated proportionally to the outcome.

Address double recovery. A matter reflected in the adjustment cannot also be indemnified.

Set the timetable: estimated closing statement three to five business days before closing; buyer's proposed final statement 60 to 90 days after; seller's objection 30 to 45 days after that; a resolution period; then the expert.

Step 14: The earnout, if there is one

Choose an objective metric. Revenue beats gross profit beats EBITDA beats "net contribution." Every layer of computation adds a place to argue.

Define it by reference to something concrete — specified SKUs by product code, specified customer contracts, a defined business unit with a defined chart of accounts.

Write specific operating covenants. General covenants are unenforceable in practice.

• Maintain the sales organization at a specified headcount or spend level.
• Continue specified distributor or channel relationships.
• No reallocation of the products or customers to another business unit.
• No pricing below a floor without consent.
• Continued funding of specified R&D or marketing at a stated level.
• No accounting policy changes affecting the metric.

Do not rely on the implied covenant of good faith and fair dealing. It fills gaps the parties did not address; it does not rewrite a bargain, and sellers who rely on it usually lose.

Add:

• Information rights: quarterly statements with supporting detail, plus an audit right.
• Acceleration on a sale of the business unit, a change of control of the buyer, or a material breach of the covenants.
• A dispute mechanism on the expert-determination model.
• Set-off: whether the buyer may set off indemnity claims against the earnout. Buyers want it; sellers should resist or cap it.

Tell the seller the truth about earnouts. Many are never paid in full. Discount accordingly.

PART FIVE — A WORKED NEGOTIATION

Harkaway Logistics Group is selling to Ventnor Capital, a private equity buyer. Enterprise value $84 million. Sellers: two founders (76 percent) and a minority investor (24 percent).

Week 1 — LOI. Harkaway's counsel, Delphine Okorafor-Weiss, insists on four terms in the LOI: RWI to be obtained by the buyer, 1 percent escrow, 18-month survival, and escrow as exclusive recourse for operational representations. Ventnor agrees to the first three and reserves on the fourth. That reservation is worth roughly $6 million of exposure, and Delphine knows it, but she also knows she will not get everything before exclusivity.

Weeks 2–7 — diligence. Ventnor's team finds four things:

1. Independent contractor classification. 140 owner-operator drivers, classified as contractors. Two states are aggressive; the exposure is modeled at $2.1 million to $5.8 million.
2. A customer contract representing 19 percent of revenue that terminates on a change of control and requires consent.
3. Unclaimed property. Uncashed vendor checks, never escheated, roughly $600,000 across eleven states.
4. A data incident eighteen months earlier, remediated, notified to affected individuals, no regulatory action.

Week 6 — insurance. Broker engaged. Three indications. Ventnor binds a $8.4 million policy at a 3.4 percent premium, 0.75 percent retention dropping to 0.375 percent at twelve months. All four diligence findings are excluded from the policy as known matters. This is expected and it is exactly why they need separate treatment.

Weeks 7–9 — negotiation of the package.

Contractor classification. Ventnor opens asking for a $6 million uncapped indemnity. Delphine counters that the classification has been in place for eleven years without challenge and that the buyer intends to continue it. Resolution: a special indemnity capped at $4 million, surviving four years, dollar-one, funded by a $2 million escrow tranche, with the sellers controlling any audit defense subject to buyer consent to settle — and a covenant that if Ventnor reclassifies the drivers post-closing, the indemnity terminates as to periods after reclassification. That last term is Delphine's, and it is a good one: it prevents the buyer from creating the liability it is being indemnified against.

The customer consent. Not an indemnity issue. It becomes a closing condition: consent obtained, or the purchase price reduces by $7 million. Consent is obtained in week 10.

Unclaimed property. A special indemnity, dollar-one, capped at $1 million, surviving three years, no separate escrow — funded from the general escrow if needed.

The data incident. Represented specifically and disclosed; a special indemnity capped at $1.5 million surviving two years, dollar-one.

Weeks 9–10 — the general package.

Why the escrow ended at 0.9 percent. With RWI in place and four special indemnities separately funded, the general escrow only needs to cover the retention and the unallocated risk. Both sides understood that, which is why a term that would have been a two-week fight in a 2010 deal took an afternoon.

Working capital. Target set at $4.9 million from a trailing twelve-month average, seasonally normalized. A sample calculation on the prior year's September balance sheet is attached as an exhibit. Accounting hierarchy: exhibit methodologies, then historical practice, then GAAP. Expert determination, range-bound, proportional fees.

Earnout. None. Ventnor proposed $6 million on EBITDA; Delphine declined and traded it for $3 million of additional closing cash. Her advice to the founders: an EBITDA earnout under a private equity owner that will change the cost structure is worth substantially less than its face amount, and $3 million certain beat $6 million contingent.

Outcome. Closed at $84 million enterprise value, $79.6 million of equity proceeds paid at closing, $756,000 in general escrow, $2 million in the classification escrow. Eighteen months later the general escrow released in full; the classification escrow released at four years, less $340,000 paid on a state assessment.

PART SIX — AFTER CLOSING

Step 15: Build the post-closing calendar at closing

Both sides should leave the closing with a written calendar:

• Escrow release dates, and the notice deadline before each.
• Survival expiry dates for each representation category.
• Special indemnity survival dates.
• Working capital statement deadlines.
• Earnout measurement dates and reporting deadlines.
• RWI policy expiry dates and the notice provisions.
• Non-compete and transition services obligations.

Assign an owner on each side. The most common cause of a lost claim is that everyone who worked on the deal moved on.

Step 16: Make a claim properly

• Identify the representation breached, by section number.
• State the facts giving rise to the breach.
• State the loss and how it is calculated, with support.
• Attach documents.
• Serve within the survival period, by the method the notice provision requires, to the addresses it specifies.
• Notify the RWI insurer in parallel, under the policy's notice provisions, which are often stricter and shorter than the agreement's.

A notice that says "the financial statements representation was breached, damages to be determined" may not preserve the claim. Courts have dismissed claims for inadequate notice.

Step 17: Handle third-party claims under the agreement's procedure

• Give notice within the period specified.
• Determine whether the indemnifying party will assume the defense, and require written acknowledgment that the matter is indemnifiable if it does.
• Where the claim involves a key customer, a regulator, or non-monetary relief, invoke the carve-outs that keep control with the buyer.
• Do not settle without the consent the agreement requires.
• Track defense costs separately; whether they are indemnifiable losses is a term that should have been addressed and often was not.

PART SEVEN — ASSET DEALS AND OTHER STRUCTURES

Asset purchases

In an asset deal the risk allocation runs primarily through assumed and excluded liabilities, not through the indemnity article.

What changes:

• The assumed liabilities schedule is the indemnity. The buyer takes only what it agrees to take, and the seller's indemnity for excluded liabilities is typically dollar-one and uncapped.
• Title representations become central. Confirm each asset is conveyed free of liens, and run UCC searches.
• Consents move to the front. Contracts requiring consent to assign are a closing condition and a diligence workstream, not an indemnity item. Identify them early; the customer who will not consent is the deal risk.
• Successor liability persists in several areas regardless of structure — environmental under CERCLA, certain multiemployer pension withdrawal obligations under 29 U.S.C. § 1381, state-law product liability continuity doctrines, employment obligations under the WARN Act, and tax in several states. An asset structure reduces exposure; it does not eliminate it, which is why a full representation set and an indemnity are still required.
• Bulk sales and tax clearance. Several states require notice or a clearance certificate; failing to obtain one can leave the buyer liable for the seller's unpaid taxes.

Carve-outs and divestitures

Where a buyer acquires a division rather than a company, add:

• Representations that the transferred assets constitute all assets used in the business.
• A transition services agreement, with its own service levels, term, and pricing.
• Representations about shared contracts, shared IP, and shared employees, and a plan for separating each.
• Indemnity allocation for pre-closing liabilities of the retained business that could attach to the transferred assets.

Distressed and 363 sales

Where the target is in bankruptcy, 11 U.S.C. § 363 permits a sale free and clear of interests, and a § 363 order is a far stronger protection than any indemnity. But note:

• Representations rarely survive closing in a 363 sale, and there is usually no escrow. The buyer's protection is the court order and its own diligence.
• Free and clear is not absolute. Successor liability for certain environmental and, in some circuits, employment obligations may survive.
• Executory contracts are assumed and assigned under 11 U.S.C. § 365, which cures the consent problem for many contracts but requires curing defaults.

PART EIGHT — MISTAKES THAT RECUR

Leaving the indemnity terms out of the LOI. Leverage disappears at exclusivity.

Comparing bids on price alone. A 12 percent escrow held two years is worth several points of price.

Starting the schedules in the final week. Errors, omissions, and post-closing disputes.

An undefined fraud carve-out. It swallows every limitation.

Attempting to disclaim knowing misrepresentation in the agreement. Unenforceable, and it colors everything else.

Leaving known problems to the general indemnity. They will be excluded from the RWI policy and argued about later. Price them.

No sample working capital calculation. The single most preventable dispute in private M&A.

An earnout with a computed metric and general covenants. Choose revenue; write specific commitments.

Joint liability among sellers. Several and pro rata, capped at each seller's proceeds.

No sellers' representative, or one without an expense fund. The mechanism fails when it is needed.

Missing the RWI notice provisions. They are often shorter than the agreement's.

No post-closing calendar and no owner. Claims are lost to calendars, not to merits.

PART NINE — FREQUENTLY ASKED QUESTIONS

What is a market escrow now? In an insured deal, 0.5 to 1 percent. Without insurance, 5 to 15 percent depending on size and industry.

Should the seller pay for the RWI premium? Usually the buyer pays, though in a competitive process the cost is reflected in price. The retention escrow is commonly split.

Will insurance cover what diligence found? No. Known matters are excluded. That is what special indemnities are for.

Is a deductible or a tipping basket standard? Deductible, in most deals above the lower middle market.

Do we need a materiality scrape? If there are materiality qualifiers and a basket, yes — a damages-only scrape is the standard compromise, otherwise the qualifiers screen twice.

Should we include a sandbagging clause? Say something rather than nothing. But the more productive conversation is about pricing what diligence found.

Can we cap our exposure for fraud? Not for knowing misrepresentation of a representation in the agreement. You can define fraud narrowly and disclaim reliance on extra-contractual statements — the ABRY structure.

How long should the survival period be? Eighteen months for operational representations is the mode. With insurance, shorter contractual survival is acceptable because the policy runs longer.

Can the buyer set off indemnity claims against the earnout? Only if the agreement says so. Buyers ask; sellers should resist or cap it.

What happens if the buyer changes the business and the earnout misses? That depends entirely on the covenants you wrote. The implied covenant of good faith will not rescue a vague earnout.

Who should be the sellers' representative? Usually the lead investor or a founder, or a professional representative service in a deal with many holders. Give the representative an expense fund and an indemnity, and make its decisions binding on all sellers.

What is the most important term in the whole article? The definition of fraud, paired with the anti-reliance provision. Everything else in the indemnity package is subject to it.

PART NINE-B — TIMELINE, BUDGET, AND STAFFING

Timeline

The compressible parts are diligence and agreement negotiation. The incompressible parts are the disclosure schedules and RWI underwriting, and compressing them is where errors come from.

Budget

The line that pays for itself is specialist diligence. It reduces RWI exclusions, identifies the risks that need special indemnities, and gives the buyer negotiating leverage grounded in facts.

Staffing

A single owner for the disclosure schedules. Not a partner and not a first-year — someone senior enough to push business functions and organized enough to track fifty schedules.

A diligence findings log, maintained daily, mapping each finding to its treatment: representation, schedule entry, special indemnity, price adjustment, closing condition, or walk.

Someone who owns the RWI process, coordinating between the broker, the insurer, and the diligence teams. Underwriting calls go badly when nobody has read the policy exclusions against the reports.

A post-closing owner on each side, named at closing, with the calendar.

PART TEN — A NEGOTIATOR'S CRIB SHEET

Terms in the order they should be negotiated:

1. What did diligence find? Every specific, quantifiable finding gets a special indemnity, a price reduction, an excluded liability, or a closing condition. Do this first; it changes everything downstream.
2. Is there insurance? If yes, the escrow and the cap for operational representations collapse to the retention, and the contractual survival can be short.
3. What is the escrow, and is it exclusive recourse? These are two questions, and the second is worth more than the first.
4. Survival, basket, cap. Now they are easy, because the risks are already routed.
5. The scrape and the sandbagging clause. Ten minutes, if the first four are settled.
6. Fraud and anti-reliance. Spend an hour here. It governs everything above.

What each side should concede early, because it buys goodwill and costs little:

Seller: the de minimis threshold, the damages-only scrape, a longer survival for tax and fundamental representations, and specific indemnities for what diligence found.

Buyer: several rather than joint liability, a per-seller cap at proceeds received, exclusive recourse to the escrow where insurance covers the gap, and a narrow, well-drafted fraud definition.

What is genuinely worth fighting over:

For the seller: exclusive recourse; the definition of Knowledge and the named individuals; whether schedule updates cure breaches; the scope of the earnout covenants; and the cap for fundamental representations.

For the buyer: the general disclosure provision's cross-qualification standard; the accounting hierarchy in the price adjustment; control of the defense for customer-facing third-party claims; and the specific indemnities for known risks.

And a closing thought for principals. The indemnity package is not lawyer detail. It is the difference between the price on the first page and the money in the account, and in most private deals that difference is between two and fifteen percent of the headline number. It is worth an afternoon of your attention.

Related documents

• Representations, Warranties, and Indemnification in Acquisition Agreements: Where the Money Actually Moves
• Purchase Agreement Review Checklist: A Practical Checklist
• Acquisition Agreement Toolkit: Reps, Schedules, Escrows, Earnouts, and Claim Notices
• Indemnification and Limitation of Liability: The Risk Allocation Engine of Every Contract
• Running a Sale Process That Survives Review: A Practical Guide for Boards
• IP Due Diligence Checklist for Mergers and Acquisitions: A Practical Checklist
• Buying and Selling a Business Toolkit: A Roadmap for Small Company Mergers and Acquisitions

This guide is general information, not legal advice, and does not create an attorney-client relationship.