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Merger & Acquisitions Insight: Advising on “Market” Terms in Healthcare Acquisitions
1. Mergers&AcquisitionsInsight:
Advisingon“Market”TermsinHealthcareAcquisitions
Client: We are a medical devices company that is considering a sale of certain rights
to patented treatment devices to a Big Pharma corporation. Can you guide us on what
indemnification obligations are customary in such cases involving the sale of IP assets?
We would like to limit our liability for any risks associated with the IP assets.
You: I can definitely answer that question and guide you through this transaction.
Indemnification Provisions in Asset Sales
In a sale of the rights to medical devices, your client’s representations and warranties with respect to the
assets being sold will be particularly tied to its ownership interests in intellectual property. The buyer may
push for unlimited indemnity, or as few indemnity limitations as it can negotiate, from your client, the seller.
You may advise the client to limit its indemnification obligations to the buyer with provisions such as:
• Aggregate cap on liability
• Exclusion of de minimis amounts
• Deductibles and baskets
• Limitation on post-closing survival period of indemnification covenants
• Materiality limitations
Taking post-closing survival periods as an example, your client may ask you: What are the customary
survival periods for indemnification? Or, is it commercially acceptable for a buyer to get unlimited or
extended survival periods for indemnification obligations related to IP assets?
Answers For Your Client
Take advantage of Lexis®
Market Tracker to help you answer these questions. Ascertain latest market
practices in transaction documents that have been publicly filed with the SEC via EDGAR®
. Choose from
900 specific deal points to narrow your search and tailor your analysis.
In this example, narrow your search criteria by choosing asset acquisitions from among the acquisition deal
types. Select healthcare as the target’s industry. You are then in position to consider any of the indemnity
limitations that could be of interest to your client.
Regarding survival period provisions, you will see in the following diagram that 11.11 percent of the healthcare
deals contain an overall single survival period (Fig. ), 43.75 percent of the deals provide unlimited or
extended survival periods (Fig. ) and 27.78 percent of the deals provide unlimited survival periods
specifically for IP representations (Fig. ).
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