Representations and Warranties in Business Acquisitions: A Buyer's and Seller's Guide
Representations and warranties are the seller's formal promises about the state of the business at closing covering financials, employees, intellectual property, litigation, tax compliance, and more. This guide breaks down the mechanics of R&W provisions: the de minimis threshold, basket (0.5–1% of deal value), cap (typically 100% of price), survival period (2–3 years), materiality and knowledge qualifiers, and fundamental warranties that survive longer. Also covers W&I (warranty and indemnity) insurance when it makes economic sense, specific indemnities, France's garantie d'actif et de passif (GAP), Germany's Gewährleistungen, and practical negotiation strategies for both sides.
## Representations and Warranties: Where the Deal Actually Lives In any acquisition, the headline price gets the press release. The representations and warranties pay the bills three years later. I have closed enough M&A transactions in the UK, France, Germany and the Nordics to say with confidence that the warranty package is where deal value moves most frequently and most invisibly after closing. A buyer who signed at £25m and recovers £4m on warranty claims has paid £21m. A seller who agreed a generous cap and ended up indemnifying a £6m tax exposure netted £19m. These are not edge cases. T…