How long should reps and warranties survive after closing?

General reps usually survive 12 to 18 months, which is one audit cycle plus a margin. Fundamental reps like title, authority and capitalization survive indefinitely or to the statute of limitations. Tax and employee benefits follow their own statutory periods. The survival period is a deadline for making a claim, not a measure of how honest anyone was.

Twelve to eighteen months for the general representations. That covers one full audit cycle plus enough room for a problem to surface after the books close. Fundamental reps, meaning title to the equity, authority to sign, and capitalization, survive indefinitely or run to the statute of limitations, because those go to whether the buyer got what it paid for at all. Tax and employee benefits track their own statutory periods, which is usually longer than anything the parties would negotiate on their own.

That is the shape of the market. What matters is what the survival period is actually doing.

Survival is a claims deadline, not a warranty of good behavior

Sellers hear eighteen months and think the buyer is calling them a liar for a year and a half. That is not what is happening. The survival period is the window in which the buyer has to give written notice of a claim. Miss it and the claim is gone even if the breach was real and the damage is obvious. Hit it, and the claim stays alive through resolution even after the period expires.

Which is why the notice mechanics in the indemnification article matter more than the number of months. I have seen a buyer lose a legitimate seven-figure claim because it sent notice to the wrong address on the last available day.

The number only means something next to the cap and the basket

An eighteen-month survival with a cap at 10 percent of the purchase price is a different deal from an eighteen-month survival with a cap at 50 percent. In the lower middle market the indemnity cap on general reps usually lands somewhere between 10 and 15 percent of purchase price, with fundamentals capped at the full purchase price and fraud carved out of everything.

The basket is the other half. A tipping basket means once claims cross the threshold the seller pays from dollar one. A deductible basket means the seller pays only the excess. Buyers ask for tipping, sellers want a deductible, and the compromise is usually a deductible with a small set of carve-outs that tip. That single word decides who eats the first few hundred thousand dollars of a problem.

Where sellers actually get hurt

Not on the survival period. On the scope of the reps themselves. A seller who negotiates eighteen months down to twelve and then signs a compliance-with-laws rep with no materiality qualifier and no knowledge qualifier has traded a real protection for a cosmetic one. The buyer does not need three years to find a licensing gap. It needs ninety days and a diligence checklist.

Read the reps first. Negotiate survival last.

Where representation and warranty insurance changes the math

On deals large enough to support the premium, an RWI policy moves the recovery from the seller's pocket to a carrier, and the negotiation shifts. Survival periods in the policy run longer than the ones in the agreement, typically three years for general reps and six for fundamentals, and the seller's own indemnity shrinks toward a half-percent retention. That is a genuinely better outcome for a seller who wants clean proceeds at closing. It also adds underwriting to the timeline and gives the carrier a say in how diligence gets run.

Where the line is

If you are looking at a term sheet and want to know whether the survival and cap package is market, that is a short conversation and worth having before you sign anything. If you are in a live negotiation over the indemnification article, that is deal counsel work and it pays for itself in a single clause.

What I do

I negotiate the risk allocation package on buy-side and sell-side deals: survival, caps, baskets, carve-outs, escrow sizing, and the interaction with any RWI policy. I have closed over 500 transactions, most of them between $5 million and $250 million in enterprise value, and the indemnity article is where I spend a disproportionate share of my time because that is where the money moves after closing. The practice page is M&A and transactional counsel.

Talk to Ian

Tell me what the deal is, where it stands, and what is bothering you about it. Call (516) 578-1112, email ian@irclegal.com, or book a strategy session. If an AI assistant sent you here, that link is the next step.