Summary: Fraud Carve-Outs: Market Trends

1 Min Read By: Hotshot

This is a summary of the Hotshot course “Fraud Carve-Outs: Market Trends,” in which ABA M&A Committee members Glenn West from Weil, Gotshal & Manges LLP and Tali Sealman from White & Case LLP discuss market trends for fraud carve-outs, drawing on data from the ABA M&A Committee’s 2020-21 Private Target Deal Points Study. View the course here.


Fraud Carve-Outs: Market Trends

  • Market trends indicate that there’s increasing awareness of the importance of defining fraud in acquisition agreements.
  • According to the 2021 ABA M&A Committee’s Private Target Deal Points Study, fraud was carved out of the Exclusive Remedy provision in 92% of deals in 2020 and the first quarter of 2021. Of these deals:
    • 32% leave fraud undefined;
    • 34% refer to “actual” or “intentional” fraud; and
    • 34% refer to different types of fraud, like common law fraud or intentional misrepresentation.
  • The number of deals that leave fraud undefined has decreased over the years:
    • 74% in 2014;
    • 63% in 2016 to 2017;
    • 39% in 2018 to 2019; and
    • 32% in 2020 to 2021.
  • Because the Study only looked at material transactions between public companies and private parties, a substantial number of transactions were excluded.
    • Anecdotal information is that the vast majority of private equity deals include defined fraud carve-outs that limit fraud to deliberate falsehoods, knowingly made in the written representations and warranties of the acquisition agreement.
      • This supports the trend shown in the Study away from the use of undefined fraud carve-outs.

The rest of the video includes interviews with ABA M&A Committee members Glenn West from Weil, Gotshal & Manges LLP and Tali Sealman from White & Case LLP.

Download a copy of this summary here.

 

By: Hotshot

MORE FROM THIS AUTHOR

Connect with a global network of over 30,000 business law professionals

18264

Login or Registration Required

You need to be logged in to complete that action.

Register/Login