The following checklist is based on a report from the American Bar Association Mergers and Acquisitions Committee, Market Trends Subcommittee, which published a study of 136 private target M&A transactions ranging in size from $17.5 M to $4.7 B, each completed in 2012.

1. Deals with an Earnout: % of deals with an earnout: 25%
2. Length of Earnout: 56% of earnouts last 24 months or less
3. “Material Adverse Effect” defined to include past events that could reasonably be expected to materially adversely affect the target: 93% included.
4. “Material Adverse Effect” excludes “force majeure”-type events (acts of war, general changes in industry, etc): 91% include these types of carveouts
5. “Knowledge” is defined as constructive knowledge as opposed to actual knowledge: 80% constructive knowledge
6. Target’s financials are a “Fair Representation” of Target’s condition:99% include a Fair Representation rep. 22% of those are qualified by GAAP (this qualification is usually beneficial to Seller, if Seller uses GAAP in its financials).
7. Target represents target is in compliance with all laws: 99% include this representation
8. Target represents it has made no untrue statement of material fact or omitted any material fact: 36%
9. When must Representations be Accurate: If signing occurs prior to closing, 57% of deals say representations must be accurate at signing and closing; 42% say at closing only, 1% had no condition.
10. How Accurate must the Representations be:
60% said target’s representations must be accurate “in all material respects”
1% said target’s representations must be accurate “in all respects” without any qualification
39% said target’s must be accurate except for inaccuracies which would not reasonably be expected to give have a material adverse effect on the target
11. “Sandbagging” means Buyer’s right to sue the Seller for breach of a representation or warranty even if Buyer knew of the breach beforehand.
41% of deals permitted this (contained a “Pro-Sandbagging” clause)
10% of deals prohibited this (contained an “Anti-Sandbagging” clause)
49% of deals were silent on this
12. Indemnification Deductible (“Basket”): 59% of deals provided that Seller was not required to indemnify Buyer for aggregate losses less than a certain amount. Of that 59%, 56% of those deals contained a “basket” of .5% or less of the total deal value.