Negotiating Contractual Indemnity in M&A Deals: Transactional and Litigation Considerations

Structuring Terms to Minimize Financial Risks

Recording of a 90-minute CLE webinar with Q&A


Conducted on Thursday, August 24, 2017
Recorded event now available


This CLE webinar will provide guidance for M&A counsel on negotiating and drafting indemnification provisions in merger documents, asset purchase agreements, and stock purchase agreements. The panel will discuss best practices for addressing challenges that may arise with indemnification claims, explain the various theories of measuring damages for breach, and examine how insurance products are being used to cover indemnities.

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 and dollar limitations, escrowed funds, setoff rights, and payment on indemnification. 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 provisions of the agreement. Deal counsel also must make sure that the indemnity provisions are enforceable against the seller’s stockholders.

Counsel must also consider how damages will be determined in the event of breach. In addition, deal attorneys should evaluate and advise their clients on whether to purchase insurance products to cover indemnities.

Listen as our authoritative panel of deal counsel 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.

Outline

  1. Negotiating indemnification provisions
    1. Types of damages covered
    2. Caps, baskets and other limitations
    3. Fraud exclusion
    4. Purchase price adjustment and double-dipping
    5. Defense of third-party claims
    6. Enforceability of indemnification obligations against non-signatories
    7. Evaluating and addressing creditworthiness of indemnitors
  2. Determining types of damages recoverable under indemnification provisions in the event of breach
  3. The use of insurance products to cover indemnities

Benefits

The panel will review these and other key issues:

  • What are the current trends in drafting and negotiating contractual indemnity provisions?
  • What are the most commonly disputed issues in M&A indemnity and what are some effective strategies for resolving them?
  • How can counsel for buyers expand indemnification protection and counsel for sellers limit indemnification liability when drafting and negotiating indemnity clauses?
  • How are damages for breach measured under indemnification provisions?
  • How are insurance products being used to cover indemnities?

Faculty

Frank C. Koranda, Jr., Partner
Polsinelli, Kansas City, Mo.

Mr. Koranda practices in corporate and finance transactional matters, principally in mergers and acquisitions. He represents both financial and strategic buyers and sellers of businesses and product lines, primarily in the private middle market. His practice also includes complex debt financings, including senior and mezzanine financing, joint ventures, and the representation of entrepreneurs and start-up companies.

Jessica C. Pearlman, Partner
K&L Gates, Seattle

Ms. Pearlman represents companies in various corporate, securities and finance matters, with an emphasis on M&As for both public and private clients, domestic and international. She chairs the Mergers & Acquisitions Market Trends Subcommittee of the M&A Committee of the ABA’s Section of Business Law and is a member of the Thomson Reuters Business Law Solutions Advisory Board.

Lisa R. Stark, Partner
K&L Gates, Wilmington, Del.

Ms. Stark has nearly 15 years of corporate experience in mergers and acquisitions, strategic investments, initial public offerings, proxy contests, and hostile takeovers. She also has experience advising private and public companies and their boards of directors on corporate governance matters.


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