M&A: Quantitative limitations of liability

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In M&A transactions, sellers may try to limit their liabilities by having quantitative limitations in the SPA.

Quantitative limitations may take the following forms:

1. “De minimis” limit provides a minimum limit for a claim to be recoverable. The rationale is to exclude small claims where the cost incurred in recovering the claims exceed what the claims are worth for.

2. Threshold or tipping basket provides a minimum limit for aggregate claims to be recoverable.

3. Having a deductible i.e. a buyer may only claim the amount in excess of an agreed sum.

4. Having a cap to the seller’s aggregate liability. The cap is usually expressed as a fixed sum or percentage of the purchase price.

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This post was first posted on Linkedin on 24 February 2023.

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