Pursuing or Defending Against M&A Post-Closing Indemnification Claims: Guidance for Deal Counsel

Description

Post-closing indemnification claims are common in M&A transactions involving acquisitions of privately held companies. For buyers, they can be a crucial way to recoup value lost due to seller misrepresentations concerning the acquired business. For sellers, they can result in exposure to millions of dollars in liabilities after the acquisition has closed. When a buyer becomes aware of a seller's alleged breach of the purchase agreement's representations, warranties, or covenants, the buyer may pursue an indemnification claim against the seller for the indemnifiable losses it suffered on the terms and conditions contained in the purchase agreement.

When evaluating whether to pursue an indemnification claim, buyers and their counsel must understand how the claim process works, as well as common challenges buyers face in evaluating potential bases for indemnification claims, preparing the claim notice, and resolving the claim. Similarly, sellers and their counsel must develop strategies for responding to indemnification claims, including arguing for the applicability of deductibles, caps, materiality, and material adverse effect (MAE) thresholds, time limits to bring claims, limitations on indemnifiable damages, anti-sandbagging provisions, and more.

Listen as our authoritative panel discusses key legal considerations and strategies for buyers, sellers, and their counsel for asserting or defending against post-closing indemnification claims in M&A transactions.