Description

Over the past several years, materiality scrapes have become the norm and can be one of the most important provisions in M&A transaction documents. A materiality scrape is a pro-buyer provision that disregards a seller's materiality qualifiers when determining if a seller's representations and warranties were breached or when calculating damages for those breaches.

There are essentially two types of materiality scrapes. A single materiality scrape eliminates qualifying language as to whether a breach of a seller's representations or warranties has occurred or the amount of damages or losses resulting from a breach, but not both. A double materiality scrape applies to both the determination of a breach and the calculation of losses.

Buyers and sellers have very different positions regarding materiality scrape provisions and reasons for their inclusion or exclusion in deal documents. Counsel for both parties must understand the impact and operation of materiality scrapes and be prepared to explore various compromises when the parties come to an impasse.

Listen as our expert panel reviews the effect and implications of materiality scrapes for both buyers and sellers and provides practical guidance for implementing these provisions in deal documents.