The buyer is demanding an uncapped indemnity basket for operational and regulatory risks, which threatens our net proceeds after the sale. How do we use our Value Growth Audit risk profile to negotiate reasonable indemnity caps and survival periods?

Question

Tyler Smith · Accepted Answer

Buyers often use the indemnity section of a purchase agreement as a backdoor way to claw back your hard-earned sale proceeds. By demanding uncapped liability or broad indemnity baskets for operational risks, they force you to carry the risk of the business long after you have handed over the keys. You must counter this aggressive positioning with objective data from your Value Growth Audit.

Your Value Growth Audit provides a rigorous, quantitative assessment of your company's operational compliance, human resources, and intellectual property. Use these audit findings to show the buyer that your operational risks are already identified, measured, and tightly managed. For example, present your documented HR onboarding processes, compliance tracking, and clean IP chain of custody to prove that the probability of a catastrophic legacy claim is statistically negligible.

With this data in hand, negotiate a clear cap on general indemnity claims, typically limited to ten to fifteen percent of the purchase price, and restrict the survival period to twelve to eighteen months. Insist on a basket or deductible threshold so the buyer cannot nickel-and-dime you for minor operational issues that occur post-close. By pointing to your audited operational compliance, you transform a theoretical legal debate about uncapped liability into a rational, risk-adjusted business decision, protecting your net proceeds at closing.