M&A Foundations · glossary
A promise to reimburse a specific loss, pound for pound (or euro for euro), if it materialises — without the buyer having to prove the share value fell, and typically outside most of the usual defences to a warranty claim. The tool of choice for known risks found in diligence, like Sunrise's Legacy AML Matter. Clause 10.2 · Chapter 12
Explained in Chapter 12, Indemnities and the Tax Covenant, of M&A Foundations.
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 →
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