The Netherlands
We note that on the levels of the liability cap, the trend is relatively stable. The amount of the liability cap is dependent on a number of factors such as the amount of the purchase price and whether or not a W&I insurance policy is taken out.
We note that the application of a de minimis and basket threshold is still very much the standard and applied in nearly every deal. The amount of the de minimis threshold is relatively stable while it appears that the amount of the basket threshold has been higher in recent deals.
Also, the time limits for claims appear to have become longer, thereby allowing purchasers to claim for longer periods of time.
Poland
Current typical amounts of liability in M&A transactions are:
Germany
The financial limitations that are the norm for German M&A at the moment are:
The time limits are usually 18 months for non-tax matters, 7 years for title matters, and no time limit for tax matters.
France
The financial limitations that are the usual in the French market at the moment are:
As regards time limits:
There are some main exceptions such as tax and environment for which 36 months plus the ongoing fiscal year is often accepted (and which mainly corresponds to the statute of limitations).
Spain
There has been an increase in the use of indemnities for identified contingencies during DD.
Italy
Currently, we are seeing caps vary from 10% to 100% of the price. For medium-sized transactions, 20/25% of the price is the average level of cap (but 100% for fundamental warranties) we are seeing, the threshold is about 1% of the price and de minimis is 0.1% of the price.
Tax warranties are included in the business warranties and cap unless specific risks are evidenced during the due diligence and then subject to special indemnities.
United Kingdom
For new platform PE investments, the position we are currently most often seeing taken is a cap on liability of £1 or equal to the W&I deductible is common as W&I is often put in place.
We may see separate caps for uninsured claims, although this is more unusual. Where there is no W&I, the cap is usually between 33% and 100% of the sellers cash out (i.e. net of any reinvestment) for business warranties and 100% of the consideration for fundamental warranties and tax claims.
The de minimis is usually 0.1% and the threshold is usually 1% (although this is less relevant where the cap is £1).
The time limits are usually sufficient time for two full audits to be carried out for the business warranties and 7 years for tax claims. On competitive processes backed by W&I, this can be brought down to 12 months for business warranty claims and 3 or 4 years for tax claims, as both periods can be extended under the W&I policy.
