Below is what we discuss in this episode all about Caps & Baskets in an M&A Process:
Introduction
- Definition of indemnification provisions
- Importance of indemnification provisions in M&A deals
Caps and baskets
- Definition of caps and baskets
- Differences between caps and baskets
- Why caps and baskets are needed
Caps
- Upper dollar limit of the seller’s indemnification obligations to the buyer
- Negotiation of indemnification cap – differences between buyers and sellers here
- Different caps for different types of losses
- General indemnification cap vs. fundamental representations and warranties
Baskets
- Threshold amount of losses that the buyer must incur before seller’s indemnification obligations are triggered
- Negotiation of basket size and structure – difference between buyers and sellers
When to talk about these items:
- Might see an introduction in LOI
- Near the end of a purchase agreement
Listen to Shoot the Moon on Apple Podcasts or Spotify.
Listen to Shoot the Moon on Apple Podcasts or Spotify.
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