M&A Foundations · glossary
A promise to repay a specific loss pound for pound if it happens. The buyer need not prove the shares lost value, and most of the usual defences to a warranty claim do not apply. It is the tool for known risks found in diligence, like the Legacy AML Matter. Clause 10.2 · Chapter 12
Explained in Chapter 12, Indemnities and the Tax Covenant, of M&A Foundations.
Also explained in Legal Due Diligence, Corporate Governance and White Label SaaS.
Commercially, usually not. The buyer's position is simple: this is your historic problem; I am not paying for it. The tool that gives effect to that position is the indemnity: a freestanding contractual promise by the seller to make a specific loss good if it materialises. The promise pays euro for euro, whether or not the problem was disclosed, and without the buyer having to prove the shares were worth less than it paid.Read Chapter 12, Indemnities and the Tax Covenant →
Every chapter of M&A Foundations is free to read, including the full training share purchase agreement.
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