Buy-Side M&A: Before You Wire the Money

On the buy side I have one rule: don't wire against a promise you can't enforce.

Buying a business is not the opposite of selling one. It's a different exercise entirely. The seller has lived in the business for years. They know which customer is restless, which contract is about to reprice, which employee is halfway out the door. You know what the data room shows. The entire transaction — every diligence request, every rep, every escrow dollar — exists to close the gap between what they know and what you can verify.

Here are three calls from live deals on the buyer's side of the table.

Sequence Diligence So Deal-Breakers Surface First

Corporate buyer, first acquisition. Software business, eight figures of enterprise value, a clean-looking data room. The buyer's plan was the standard one: kick off legal, accounting, and quality-of-earnings diligence in parallel and let the findings come in as they come in.

I resequenced it. Before anyone spent real money, I ran the handful of questions that kill deals: who owns the code, is there undisclosed litigation, does revenue depend on anything with a short fuse. Within two weeks we had the answer. A meaningful piece of the core product had been written by contractors — and nobody had ever signed an IP assignment.

That's a deal-breaker if it surfaces at signing. Surfaced early, it's a work plan. We made pre-closing assignments a condition and chased down the contractors while the accountants were still ramping. The buyer closed with assignments in hand for everyone we could find, and money sitting behind the two we couldn't.

Diligence order is a decision, not logistics. Find out whether there's a deal before you pay to study one.

Reps You Can Enforce Beat Reps That Read Broad

Buy-side for an operating company acquiring a services firm. The seller's counsel sent back a markup with the same edit on nearly every rep: "to Seller's knowledge." It reads harmless. It isn't. A knowledge qualifier converts a promise about the business into a promise about the seller's awareness — and after closing, you get to litigate what one person knew and when.

Broad reps that can't be enforced are comfort, not protection. So I fought narrow instead of broad. Knowledge got defined as the actual knowledge of three named people, after reasonable inquiry of the employees who would know. And the one exposure diligence had actually flagged — a wage-classification question in one state — came out of the reps entirely and went into a standalone indemnity, covered from dollar one, no basket.

About a year after closing, that classification issue turned into a real claim. Nobody deposed anyone about knowledge. The indemnity said what it said, and it paid.

A rep is only worth what it costs the seller when it's wrong.

Size the Protection to the Deal

PE sponsor, add-on acquisition, mid-teens millions in enterprise value. The sponsor's playbook said rep-and-warranty insurance — that's what their bigger deals used, and it keeps sellers agreeable. I priced it anyway: premium, underwriting fee, and a retention that sat uncomfortably close to what a realistic claim on a deal that size would actually be worth. The policy would have protected the sponsor against catastrophes and left it exposed on everything likely.

We skipped the policy. I negotiated a larger escrow instead — real money, staggered releases, sized against the specific risks diligence had surfaced and drafted to stand behind both the indemnity and the purchase price true-up. The seller grumbled and then agreed, because the alternative was an insurer's diligence process on a timeline that didn't have room for one.

The working capital true-up came due a few months after closing and turned into a fight. The policy would not have covered it anyway. That is the point. The fight that shows up on a deal this size is rarely a catastrophe an insurer will pay. The money was already sitting in escrow. No claim notice to an insurer, no retention math, no coverage counsel. A short letter and a release schedule.

R&W insurance is a tool. On the right deal it's the best tool there is. On a deal this size, an escrow you can actually reach is worth more than a policy you can't.

The Practice

Most deals fall between $5 million and $250 million. I've closed at $1 billion+. Roughly half my transaction work is buy-side. I'm lead counsel on every deal, and if anyone else touches paper, I supervise it. Hourly or scoped-fee engagement, depending on the deal.

First-time corporate buyers: I run the process so you don't learn M&A on your own acquisition.

PE sponsors running add-ons: I execute at deal-calendar pace and size the protection to the deal in front of us, not the last one.

Serial acquirers and corp-dev teams: I plug into your playbook, tighten it where it's leaking, and run the transaction end to end.

If you're circling a target, send me the LOI or the CIM. I'll tell you where the risk lives before you go exclusive.

About the Author: Ian R. Cohen is the founder of IRC Legal, a boutique law firm on Long Island offering strategic M&A counsel and fractional General Counsel services. 17+ years of experience. 500+ closed transactions. $3B+ in aggregate deal value. He came up through Schulte Roth & Zabel and BakerHostetler, served as in-house General Counsel of a PE-backed company through nine-figure financings and a public-market process, and built IRC Legal around direct, senior-level deal execution.