Common issues in M&A transactions

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Common issues in M&A transactions:

• Guarantor
The seller and buyer may want the other party’s obligations under the sale and purchase agreement (SPA) to be guaranteed by another party (usually the holding company or shareholder) if the seller and buyer do not have strong financial means.

• Limitation of liability
The seller may limit its liability by excluding events under which it would be liable, limiting the period a claim is allowed, capping the maximum amount a buyer may claim or allowing a claim only if the amount claimed exceeds an agreed minimum sum. The buyer obviously would want to push back on such limitations.

• Indemnity
The buyer typically requires the seller to indemnify the buyer in certain circumstances such as when the seller breaches its representations and warranties or when there is a claim brought against the target company which is due to the seller’s fault. The seller may want to limit the indemnity events and the number of parties it is required to indemnify.

• Non-competition
An SPA typically contains non-competition provisions which prevent the seller from competing with the target company upon completion of the transaction. The seller may want certain exceptions to the restrictions.

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This post was first posted on Linkedin on 12 March 2021.

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