The Middle Ground

A GUIDE TO DEAL TERMS IN PLAIN ENGLISH


+ Introduction

+ Purchase and Sale

+ Closing

+ Representations & Warranties - Seller

+ Representations & Warranties - Buyer

+ Covenants

+ Conditions to Closing

+ Indemnification

+ Termination

+ Miscellaneous

Brokers


Classification: Under the Radar
Section: Representations and Warranties of Buyer
Negotiation Time: Minimal
Transaction Costs: Insignificant
Major Impact: Risk Management


What is This? The Representations and Warranties of Buyer portion of the Agreement is used to save the Seller time and money. Rather than require the Seller to go through third parties to find certain information, the Buyer provides the information and must reimburse the Seller for any Losses it suffers if the information is false or misleading. Here, the Buyer provides information regarding relationships it has with business brokers and other third-party transaction advisors.

The Middle Ground: The Buyer represents that no intermediaries are entitled to any brokerage fee or commission in connection with the acquisition, except for the intermediaries listed in the Agreement.

Purpose: Just like the Seller’s “Brokers” representation, this representation is used to manage risk, albeit a small and remote risk. The reciprocal nature of this representation, as well as its relatively minor status within the context of the Agreement, means that it is often included in its standard form and is not the subject of explicit negotiation between the parties.

Buyer Preference: None.

Seller Preference: None.

Differences in a Stock Sale Transaction Structure: None.


DISCUSSION

We want The Middle Ground to be an ongoing dialogue for and resource to the lower middle market M&A community. The outline above is generally applicable, but there is always specific case law and nuance around certain industries that can be useful in helping buyers and sellers come together. If you are a lawyer or deal professional, we encourage you to add your perspective below.