Insight Private Acquisition Agreements: Survival Periods

The length of the survival period for representations and warranties is often a hotly negotiated point in private mergers and acquisitions. Buyers typically want a longer survival period, whereas sellers prefer to shorten or eliminate the survival period. A recent market survey by the Practical Law Company (PLC) confirms that survival periods of between 12 and 24 months represent the overwhelming norm in private acquisition. This confirms our experience and other surveys that suggest an 18-month survival period is the most common. In addition, the PLC survey confirms that the general survival period in most private acquisition agreements excludes certain representations—such as those regarding organization, authority, capitalization taxes, employee benefits, and environmental matters. The agreements typically provide that representations excluded from the general survival period survive for a longer or indefinite period.

Here is the full data from the PLC’s survey. The survey is based on the last 50 deals added to the PLC’s What’s Market private acquisition database. Of those 50 deals, 43 deals included a survival period for representations and warranties made by the seller or target company (excluding one deal where the survival period was redacted in the public filing), while six deals expressly stated that the representations and warranties do not survive the closing. Of the 43 deals:

• One deal (2.33%) had a survival period of less than one year.
• 37 deals (86.05%) had a survival period between one and two years.
• Four deals (9.30%) had a survival period over two years (including one that extended for 60 days after the expiration of the applicable statute of limitations).
• One deal (2.33%) did not specify a limit on the survival period.

In addition, 36 of the 43 deals with general survival periods and three of the six deals with no general survival period had exceptions for representations, such as those regarding organization, authority, capitalization taxes, employee benefits, and environmental matters.

For more information, please contact our Business Group or call 208.344.6000.