Representations and Warranties in Mergers and Acquisitions (M&A)

#mergersandacquisitions #corporatelaw #business
Representations and warranties (or reps & warranties) come up often in the world of mergers and acquisitions. Whether you're the seller or the buyer of a business, reps and warranties make up a significant portion of the final purchase agreement.
"What are representations and warranties? Why are they so important?" you ask. Well, dear viewer, put simply, they are statements about the state of the business that serve as the basis for indemnification and an allocation of risk between the buyer and the seller.
That's the explanation put simply. If you want to know more (and you should), watch the video where Brett makes six main points about the role of representations and warranties from his perspective as a corporate lawyer.
Here's a quick rundown in case you want to jump ahead:
0:51 - Representations and warranties are statements about a business
2:00 - Reps and warranties as basis for indemnification
4:36 - Why reps and warranties are important when buying a business
5:39 - Representations and warranties aren't always facts
6:58 - Reps and warranties as allocations of risk
7:34 - They are almost always joint and several
10:21 - The two main qualifiers: knowledge & materiality
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Have questions? Book a call, and talk to Brett today:
clarity.fm/brettcenkus
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You can reach Brett through:
clarity.fm/brettcenkus
/ brettcenkus
/ bcenkus
www.cenkuslaw.com
braatenwoods.com
merger-resources.com
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Brett A. Cenkus has 20+ years of experience in business law, finance, and entrepreneurship. Through Cenkus Law, PC, he provides advice and services for mergers & acquisitions (M&A), securities offerings, founders’ agreements, and other general business law issues.
Through Braaten Woods, LLC, Brett helps business owners in the lower middle market ($2MM - $25MM) position themselves for sale, find buyers, negotiate, and close M&A deals.
Brett also maintains merger-resources.com, a site packed with free articles, videos, checklists, deal diagrams, template contracts, and other tools to help pass M&A knowledge to others.
Brett regularly consults with entrepreneurs and invests his own capital as an angel investor.
From 2010-2013, Brett served as Chief Legal Counsel of a publicly-traded international oilfield services company. From 2001 to 2006, he and a partner founded and built Paragon Residential Mortgage. Bridge Investments acquired Paragon in 2006.
Brett holds a Juris Doctorate from Harvard Law School and a Bachelor of Arts degree in Economics from Messiah College in Grantham, Pennsylvania.
Brett lives in Austin with his wife, Cathryn, and two children. He enjoys reading, squash, classic movies, great food and wine, and the New England Patriots.

[@tomvader5913]

On behalf of Law students with M&A modules, thank you!!!!!

[@BrettCenkus]

you're welcome, Tom!

[@josephbates9352]

I've been practicing M&A law for the past 6 years and you so far have given the best ever explanation of this concept I have come across!

[@taisiabunina2763]

Your comments are very helpful, I am very grateful for your explanations

[@elijahisaiahx920]

You explain this so simple, a fifth grade can understand. I'm sure our team can't afford you right now, but you better believe once we get the first acquisition under our belt, we will call you for the roll up process. Thank you for everything you do here.

[@davidbedard7195]

Simply excellent - your command of the subject is obvious and your presentation skills make the information easy to digest.

[@BrettCenkus]

David, it is great to hear such positive feedback! Thank you.

[@tonialoneta1617]

Thank you so much! Such a great lawyer/teacher. People can have the knowledge but not know how to teach or pass it on. Please can you explain more on the qualifications from a buyer and seller perspective and what key things to think about from both perspectives.

[@thomaslibbey5694]

Grateful for you....currently in law school and feel like I’m being shorted of education within the classroom...would love the opportunity to learn from you!

[@ishanjavid2465]

Thank you for this informative video. I am a corporate lawyer from India and I regularly advise buyers and sellers on transactions in the energy/infrastructure space.

[@BrettCenkus]

you're welcome, Ishan! I spend some time in that space, too (over here in the U.S.)!

[@rorronoazorro6107]

Great content sir !! It’s certain that you know what you doing and how !!! Well done to you!

[@kimreynolds6747]

Great content, very valuable . Thank you for theses videos!

[@RS-fy4cg]

You are awesome!!!!!! Please keep up i am learning ALOT from you. Thank you!

[@mitraarabandi4978]

Hi. This is amazing content. I am learning so much from your videos. Can you make a video on the principles of marking up reps and warranties from the buyer and seller side?

[@fernandoosma297]

Brilliant! thank you very much

[@snkhan6878]

really good content, helped me alot in preparing for my final Master's degree exam.

[@BrettCenkus]

Great, I am glad that I was able to be helpful!

[@nicolebyrne5053]

question / do u recommend a particular attorney on a contract breach , and which insurance companies pay indemnification claims? thanks in advance Brett

[@KoolKatProducions123]

very helpful for my interview!

[@BrettCenkus]

I'm glad my video helped, David!

[@ralphwebster8318]

Excellent

[@larysapayne3435]

Brett, I love your videos! Do you have any plan to present on RWI insurance?

[@BrettCenkus]

yes, Larysa. I have that topic on the list (moving up - likely a few months out). That is a great topic!

[@desiaclementslewis8318]

Thank you

[@BrettCenkus]

You're welcome, Desia!

[@thisismitch2403]

Hi Bret, thanks for the video. Do we need reps n warranties in an MBO transaction?

[@BrettCenkus]

Yes, you'd want some reps & warranties for sure. Since the buyers in this instance will know a lot about the company, possibly more than the sellers, your reps & warranties may be lighter than usual, although that depends (it depends on how much the existing owners may know about relevant topics), and there are some that you'd absolutely want, e.g., that the current owners have title to their shares/equity interests and there is nothing preventing them from entering into the deal. I'm assuming this is a private company deal, right?

[@thisismitch2403]

@@BrettCenkus Thanks for the reply. Understood. Yes, this is private company deal.

[@BrettCenkus]

@@thisismitch2403 You're welcome.

[@iceyred6668]

Salers/building/agreed'ment

[@thomasarmstead8719]

GREAT! GET RID OF THE backround music!

[@BrettCenkus]

Yep, that was an experiment that didn't work really well. We are not using music any longer. Thank you for the feedback.

[@thomasarmstead8719]

@@BrettCenkus LOL That's how you learn: by doing! Your videos are incredibly helpful! I started www.ArmsteadIndustries.com to rollup multifamily, healthcare and franchises. We are negotiating with a top 100 law firm for representation and are seeking to acquire a company for $800MM and tiny companies for 1-2-3 million to 10-20-30MM. I watchlisten your videos over and over and each time find something new! THANK YOU!

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Salers/building/agreed'ment //nd.D

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[@iceyred6668]

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[@ralphwebster8318]

Excellent

[@ralphwebster8318]

I need to stop by.