We just signed an LOI and the buyer's legal team is pushing for an unlimited survival period on general representations and a massive indemnification cap. How do we use our documented operational systems to negotiate these survival periods and baskets down to market standards so we can secure our proceeds?

Question

Tyler Smith · Accepted Answer

The buyer's legal team wants to push as much risk as possible back onto you after the transaction closes. They do this by demanding long survival periods for general representations and high indemnification caps. If you accept these terms, you are effectively leaving a massive portion of your proceeds at risk for years. To negotiate these terms down, you must prove that your business operates on a clean, documented foundation that minimizes their post-close risk.

This is where your Business Integrity Review and your documented processes come into play. During the LOI to close phase, present your core processes and operational manuals as evidence that your business is run systematically. Show them your history of compliance and operational consistency managed through your Level 10 Meeting structure. When you can prove that your team consistently tracks metrics and handles issues immediately, you reduce the buyer's perceived operational risk.

Push for a survival period of twelve to eighteen months for general representations, which aligns with one full audit or operating cycle. Negotiate a basket and a cap of no more than ten percent of the purchase price, backed by representations and warranties insurance. This shifts the risk to a third-party insurer and allows you to walk away from the closing table with your cash secured. Your recommendation is to use your operational compliance history to demand market-standard caps and let insurance cover the rest.