M&A Nugget: Every Word Matters
This Nugget is for those English majors out there. In a purchase agreement, every word matters. The omission of a keyword or the incorrect use of a word can have an adverse impact on the purchaser’s or seller’s rights under the agreement. For example, in describing a list of assets to be acquired, using the word “including” after a delineated list, rather than “including, but not limited to” might have the effect of limiting the assets being acquired. Although logic tells us that “including” has the same meaning as “including, but not limited to,” some courts have held that “including” actually acts to limit the list of items to those listed after the word “including”. Therefore, the additional words “but not limited to” should always be used. As an example of keywords being omitted, consider the indemnification clause in a purchase agreement, by which the seller agrees to indemnify the purchaser for pre-closing operations and breaches of representations and warranties. An indemnification clause may state that the seller indemnifies the purchaser for any loss, damage and “cost and expenses” incurred. Can the purchaser recover its attorneys’ fees under such a clause? The answer is no. The indemnification clause must specifically include “attorneys’ fees and costs of the legal proceeding” as a recoverable item. Last, suppose a seller is asked to subordinate its right to receive payment to the purchaser’s lender. There are different kinds of subordination. Some lenders require “deep” subordination. The addition of the word deep drastically changes the extent to which a seller subordinates its right to payment. So, although the wordsmithing in the purchase agreement is the attorneys’ responsibility, it is important to keep in mind that every word matters.
If you have any questions about this or any other M&A issue,
please contact Glenn Solomon at firstname.lastname@example.org or 443-738-1522.
ABOUT GLENN D. SOLOMON
email@example.com | 443-738-1522
Glenn D. Solomon is a principal at Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years. He has extensive experience in the purchase and sale of businesses, structuring ownership agreements, and advising companies in financial distress.
ABOUT OFFIT KURMAN
Offit Kurman is one of the fastest-growing, full-service law firms in the Mid-Atlantic region. With over 150 attorneys offering a comprehensive range of services in virtually every legal category, the firm is well positioned to meet the needs of dynamic businesses and the people who own and operate them. Our ten offices serve individual and corporate clients in the Maryland, Delaware, New Jersey, and Northern Virginia markets, as well as the Washington DC, Baltimore, Philadelphia, and New York City metropolitan areas. At Offit Kurman, we are our clients’ most trusted legal advisors, professionals who help maximize and protect business value and personal wealth. In every interaction, we consistently maintain our clients’ confidence by remaining focused on furthering their objectives and achieving their goals in an efficient manner. Trust, knowledge, confidence—in a partner, that’s perfect.
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