When sellers sell their companies, the focus is usually on the big-ticket terms in the sale and purchase agreements (SPA) – price, payment terms, earn-outs.

However, the disclosure letter is where the risk gets managed, and it’s often rushed.

This is the document where sellers set out exceptions to the representations and warranties they give in the SPA. If done correctly, it protects the sellers from future claims of breach of representations and warranties.

I’ve seen sellers finalise the SPA with their lawyers on their side, then scramble to pull together the disclosure letter without involving their lawyers at all.

You don’t want to spend weeks negotiating representations, warranties and liability caps, only to lose the protection because of a material omission in the disclosure letter.

Sellers should go through each representation and warranty carefully with their lawyers. Make sure all exceptions are clearly disclosed in the disclosure letter.

The disclosure letter is not just paperwork. It’s part of the deal. It deserves the same attention as the SPA.

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This post was first posted on LinkedIn on 30 April 2025.