M&A: What to do if there’s problem?

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What choices does a buyer have if the buyer’s due diligence reveals issues with the company or assets which the buyer intends to acquire?

If the buyer intends to proceed with the acquisition and requires the issues to be addressed, the parties may consider the following:

1. Seller to indemnify the buyer or target company from damages and losses arising from the issue in question.

2. Retention of part of the consideration after completion of the sale and purchase until the seller rectifies the issue within an agreed period of time.

3. Rectification of the issue to be made a condition precedent to the agreement. The agreement would not be completed unless the condition precedent is fulfilled (i.e. the issue rectified) by the seller.

4. Adjustment or reduction of price.

What would you add to the list?


This post was first posted on Linkedin on 1 September 2021.

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