Purchase Agreement Review Checklist: A Practical Checklist

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

Work top to bottom. Mark each open point with an estimated dollar exposure; the list you finish with is the negotiation agenda, ranked.

Part 1 — Structure and price

Confirm the structure: stock purchase, merger, asset purchase, or unit purchase — and that the tax analysis supports it.
Confirm who the actual parties are, including any acquisition subsidiary and any guarantor.
Confirm the purchase price definition and every component: cash, rollover equity, seller notes, earnout, assumed debt.
Confirm the treatment of debt, cash, and transaction expenses in the price calculation.
Confirm option and warrant treatment, and who bears the cost of cashing them out.
Confirm the allocation among sellers and that the waterfall matches the charter and any stockholder agreement.
Confirm the payment mechanics: paying agent, wire instructions, letters of transmittal, timing.

Working capital and other adjustments:

Is the target derived from real historical data, normalized for seasonality?
Is a sample calculation attached as an exhibit?
Is the accounting hierarchy specified — exhibit methodologies, then historical practice, then GAAP?
Are the estimated statement, final statement, and objection deadlines specified?
Is the dispute mechanism an independent accountant acting as an expert and not as an arbitrator, deciding only disputed items, within the range of the parties' positions?
Is the fee allocation proportional to the outcome?
Is double recovery expressly barred — a matter in the adjustment cannot also be indemnified?
Is there a true-up escrow or is the adjustment paid directly?

Part 2 — Representations

Does the set match this business? Add industry-specific representations; delete inapplicable ones.
Financial statements: prepared in accordance with GAAP, consistently applied, fairly presenting.
Absence of undisclosed liabilities.
Absence of certain changes since the balance sheet date.
Material contracts: is the definition's threshold appropriate to the size of the business?
Litigation, including threatened matters.
Compliance with law and permits.
Taxes.
Employee benefits and ERISA.
Labor and employment, including classification.
Intellectual property: ownership, assignments, open source, licenses in and out.
Data privacy and cybersecurity, including incidents.
Environmental.
Real and personal property, and title.
Insurance.
Customers and suppliers, and any concentration.
Related-party transactions.
Export controls, sanctions, and anti-corruption, if there are international operations.
Brokers.
Is there a 10b-5 catch-all representation? Buyers want it; sellers should trade for its removal.

Qualifiers — read them together:

For each representation, list the qualifiers applied: materiality, knowledge, dollar threshold, time period.
Is "Knowledge" defined by a named list of individuals? How many, and are they the right ones?
Is it actual knowledge, or actual knowledge after reasonable inquiry?
Are the dollar thresholds proportionate to the business?
Ask for each representation: what would actually have to happen for this to be false? If the answer is "almost nothing could," the qualifiers have compounded.

The scrape:

Is there a materiality scrape? Damages-only, double, or none?
Are the definitional-materiality representations carved out (material contracts, and similar)?

Part 3 — Disclosure schedules

Is every representation matched to a schedule, and every schedule to a representation?
Does each schedule disclose facts, not document references?
Are facts cross-referenced under every representation they qualify?
Read the general disclosure provision: does cross-qualification require relevance to be apparent on the face of the disclosure, or merely "reasonably apparent"?
Is over-disclosure a problem — do the schedules obscure the material items?
Are the schedules dated and version-controlled?
Is a signed, dated set retained for signing and for closing?

Update rights — the most consequential term in the schedules:

May the seller update between signing and closing?
Does an update cure a breach for indemnification purposes, or only inform the buyer?
Does an update affect the bring-down condition and the buyer's walk right?
Confirm the position is deliberate. A curative update transfers all interim risk to the buyer.

Part 4 — Covenants and closing conditions

Interim operating covenant: is "ordinary course consistent with past practice" qualified appropriately, and are anticipated changes expressly permitted?
The list of prohibited interim actions and the consent standard for each.
Efforts standard for closing conditions: commercially reasonable, reasonable best, or best efforts.
Regulatory covenants: who files, who pays, what remedies each party must accept.
Exclusivity and non-solicitation during the interim period.
Access and information rights.
Confidentiality and announcement provisions.
Post-closing covenants: non-compete, non-solicit, transition services, records access, further assurances, tax cooperation, D&O indemnification and tail insurance.

Conditions:

Bring-down standard for representations: absolute, materiality-qualified, or MAE-qualified — and which representations get which.
Covenant compliance in all material respects.
Required consents: which ones, and what happens if one is not obtained.
Regulatory approvals.
No MAE — and note that this is not a practical walk right; see In re IBP, Inc. Shareholders Litigation, 789 A.2d 14 (Del. Ch. 2001) and Hexion Specialty Chemicals, Inc. v. Huntsman Corp., 965 A.2d 715 (Del. Ch. 2008).
If the buyer needs to be able to walk for a specific risk, is there a specific, quantified condition?
Financing: is there a financing condition, or a reverse termination fee?
Termination rights, the outside date, and the fees payable on each termination trigger.

The MAE definition:

The general clause.
Carve-outs: economic conditions, industry conditions, law and accounting changes, war and disaster, announcement effects, failure to meet projections, actions at the buyer's request.
The disproportionate-effect proviso, and which carve-outs it applies to.
Whether "failure to meet projections" carves out the failure but preserves the underlying cause.

Part 5 — The indemnity package

Survival:

Operational representations: ____ months (market: 12–24).
Specified representations, if any: ____ months.
Fundamental representations: ____ (SOL or a long fixed period).
Tax: SOL plus ____ days.
Covenants: pre-closing and post-closing.
Fraud: unlimited.
Does a claim survive on notice, or must suit be filed within the period? Specify.

Basket:

Deductible or tipping? (Deductible is standard above the lower middle market.)
Amount: ____ (market: 0.5%–1.0% of price).
De minimis per claim: ____ (market: 0.05%–0.1%), with related claims aggregated.
Carve-outs from the basket: fundamental representations, fraud, special indemnities, the price adjustment.

Cap:

Operational: ____ (market: 10%–15% traditional; the retention if insured).
Fundamental: ____ (market: 100% of price).
Is each seller's exposure capped at the proceeds it received?
Is liability several and pro rata, not joint?

Escrow:

Amount and percentage.
Term and release schedule; partial release at an interim date?
Pending claims hold back the claimed amount.
Escrow agent named; fees allocated; interest treatment specified.
Is the escrow the exclusive recourse for operational representations? This is distinct from a cap.

Exclusive remedy:

Present, with carve-outs for fraud, specific performance and injunctive relief, the price adjustment, and separate agreements.

Fraud:

Is "Fraud" defined? An undefined carve-out swallows every limitation.
Does the definition require actual, knowing, intentional misrepresentation of a representation in the agreement?
Does it expressly exclude constructive fraud, equitable fraud, promissory fraud, negligent misrepresentation, and recklessness?
Is there a full anti-reliance provision disclaiming reliance on extra-contractual statements, projections, and data room materials?
Confirm the agreement does not attempt to disclaim liability for knowing misrepresentation of a contractual representation — see ABRY Partners V, L.P. v. F & W Acquisition LLC, 891 A.2d 1032 (Del. Ch. 2006).

Sandbagging:

Pro, anti, or silent? Confirm the choice is deliberate rather than inherited from a form. Delaware generally enforces the contract as written — see Eagle Industries, Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228 (Del. 1997) — but do not leave it to the governing law.

Loss definition:

Are consequential damages excluded? Is there a carve-out for amounts actually paid to third parties?
Is diminution in value addressed — multiple-based damages or out-of-pocket?
Are defense costs indemnifiable?
Is mitigation required, and is the standard scoped reasonably?
Are insurance and third-party recoveries netted, and are premium increases and deductibles added back?
Are tax benefits netted only when actually realized?
Is double recovery barred across the adjustment, the indemnity, and the insurance policy?

Part 6 — Special indemnities

Has every material diligence finding been priced — special indemnity, price reduction, excluded liability, or closing condition?
For each special indemnity: the covered matter defined precisely by reference to the diligence document or schedule item.
Dollar-one (basket does not apply).
Cap, or expressly uncapped.
Survival period appropriate to the risk.
Separate escrow tranche where the amount warrants.
Who controls the defense and who must consent to settle.
What happens if the matter resolves favorably before release.
Any covenant preventing the buyer from creating or aggravating the liability post-closing.

Part 7 — Representation and warranty insurance

Limit, retention, premium, and who pays each.
Does the retention drop after twelve months?
Is the retention escrow split, and how?
Read the policy exclusions against the diligence reports. Gaps in diligence become exclusions.
Confirm known matters are handled by special indemnities, not left to the policy.
Confirm the policy's survival periods (typically 3 years operational, 6 fundamental).
Confirm the policy's notice provisions, which are often shorter and stricter than the agreement's.
Confirm subrogation is waived against the sellers except for fraud.
Confirm the agreement and the policy define "Loss" consistently.

Part 8 — Earnout

Is the metric objective and defined by reference to something concrete (SKUs, contracts, a defined chart of accounts)?
Is the measurement period and payment date specified?
Are the operating covenants specific: headcount, channel relationships, no reallocation, pricing floors, R&D or marketing spend, no accounting policy changes?
Are there information rights, with supporting detail and an audit right?
Is there acceleration on a sale of the business, a change of control, or a covenant breach?
Is there a dispute mechanism on the expert-determination model?
May the buyer set off indemnity claims against the earnout? Is it capped?
Has the seller discounted the earnout appropriately in its own valuation?

Part 9 — Asset deals and distressed sales

Asset deals:

Assumed liabilities schedule is complete and precise.
Excluded liabilities are defined broadly and indemnified dollar-one and uncapped.
Title representations and lien searches for every material asset.
Consents required to assign: identified, with a plan and a closing condition.
Successor liability analysis for environmental under CERCLA, multiemployer withdrawal under 29 U.S.C. § 1381, WARN, product liability continuity, and state tax.
Bulk sales notice and tax clearance certificates where required.
Allocation of purchase price among asset classes, agreed for tax purposes.

Distressed and 363 sales:

Confirm the sale order provides free and clear relief under 11 U.S.C. § 363.
Confirm executory contracts are assumed and assigned under 11 U.S.C. § 365, with cure amounts determined.
Understand that representations rarely survive and there is usually no escrow; the order and diligence are the protection.
Analyze which successor liabilities may survive the order notwithstanding.

Part 10 — Claims and the post-closing calendar

Claim procedure:

Notice content requirements: representation breached, facts, loss, calculation.
Notice method and addresses.
Third-party claim procedure: notice period, right to assume the defense, acknowledgment of indemnifiability, counsel approval, consent to settle.
Carve-outs from the indemnitor's control: injunctive relief, governmental claims, key customer relationships, criminal matters.
Participation rights and cost allocation.

Post-closing calendar — issue it at closing, with a named owner on each side:

Escrow release dates and the notice deadlines before each.
Survival expiry for each representation category, with a review 45 days before each.
Special indemnity survival dates.
Working capital statement and objection deadlines.
Earnout measurement dates and reporting deadlines.
RWI policy expiry and notice provisions.
Non-compete and transition services obligations.
Tax filing and cooperation obligations.