Market Trends: What You Need to Know
As shown in the American Bar Association s Private Target Mergers and Acquisitions Deal Point Studies:
Only 2% to 9% of the merger and acquisition purchase agreements covered by the studies expressly included consequential damages within the scope of indemnified losses
26% to 39% of the purchase agreements expressly excluded consequential damages within the scope of indemnified losses
39% to 65% of the purchase agreements were silent on the issue
Introduction
In M&A transactions, the definitive purchase agreement, whether asset purchase agreement, stock purchase agreement, or merger agreement, typically contains representations and warranties and related indemnification covenants. Buyers and sellers often negotiate the scope and types of damages subject to indemnification under the purchase agreement, including whether consequential damages that the buyer may suffer as a result of the seller s breach should be included in, or excluded from,