Working-capital adjustments, indemnification carve-outs, earn-out structure, and survival-period mismatches turn press-release numbers into the number that actually closes. We inspect every clause, label what is structural, and flag what is going to crack under load.
If the agreement says working capital will be 'a normalized level consistent with past practice' without naming the dollar target, you will fight for that number under closing pressure with the seller's books and the seller's accountant. Insist on a fixed number in the agreement before signing.
Earn-outs tied to revenue (rather than gross margin or EBITDA) reward the seller for pre-closing pull-ins and incentivize behaviour that hurts margin and customer relationships. Tie the earn-out to a metric you both control — and add operational covenants protecting your post-close decisions.
The 15% cap on general reps is fine. The carve-outs for tax, environmental, title, and authority are also standard. The problem is when those carve-outs also bypass the de minimis basket and threshold, so a single small claim under fundamentals creates immediate exposure with no filtering. Read the carve-outs carefully.
If reps survive 18 months but escrow releases at 12, there is a six-month gap where any claim has to be made directly against a seller who may have distributed proceeds to family members and trusts. Match the escrow window to the survival period for the reps it secures.
Asset purchase agreement, schedules, disclosure schedules, related ancillary docs. PDF only. No account, no login, no sales call.
Working capital, earn-out, indemnification, escrow, restrictive covenants — cross-referenced, ranked by severity, tied to section numbers.
Plain-English report. Take it to your M&A counsel. Walk into the negotiation with the right items prioritized and the right questions ready.
Earn-out tied to gross revenue rewards pre-close shipments and aggressive pricing that hurt margin and customers post-close. Switch to gross margin or EBITDA, with operational covenants.
Target is to be agreed pre-close in good faith. In practice, this becomes a six-figure dispute under deadline with the seller's books and the seller's accountant.
Tax, environmental, title, and authority claims bypass the cap — standard. They also bypass the basket and threshold, so a single small claim creates immediate exposure with no de minimis filter.
We are running the first batch of M&A inspections at no cost while we calibrate the standard. You give us an email; we give you the report. M&A counsel still runs $15K to $50K and is worth every dollar — inspection makes that conversation 30× cheaper to start.
Delivered after analysis. Print and PDF-friendly.
Email signup · 1 free report per address