Understanding Caps and Baskets in M&A Transactions

<p>Below is what we discuss in this episode all about Caps & Baskets in an M&A Process:</p><p>Introduction</p><ul><li>Definition of indemnification provisions</li><li>Importance of indemnification provisions in M&A deals</li></ul><p>Caps and baskets</p><ul><li>Definition of caps and baskets</li><li>Differences between caps and baskets</li><li>Why caps and baskets are needed</li></ul><p>Caps</p><ul><li>Upper dollar limit of the seller’s indemnification obligations to the buyer</li><li>Negotiation of indemnification cap – differences between buyers and sellers here</li><li>Different caps for different types of losses</li><li>General indemnification cap vs. fundamental representations and warranties</li></ul><p>Baskets</p><ul><li>Threshold amount of losses that the buyer must incur before seller’s indemnification obligations are triggered</li><li>Negotiation of basket size and structure – difference between buyers and sellers</li></ul><p>When to talk about these items:</p><ul><li>Might see an introduction in LOI</li><li>Near the end of a purchase agreement</li></ul><p>Listen to Shoot the Moon on <a href="https://podcasts.apple.com/us/podcast/shoot-the-moon-with-revenue-rocket/id1478519505">Apple Podcasts</a> or <a href="https://open.spotify.com/show/6y7u9KuOjaplhScHtINGZU">Spotify</a>.</p>