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Keep the Benefit of the Bargain - Reps and Warranties Survival in Healthcare Deals

Written by: Rachel Irving Pitts

In recent healthcare mergers and acquisitions, we have seen the parties increasingly focus on the survival length of the representations and warranties in the purchase agreements. More often than not, sellers are looking to reduce the survival time period for “reps and warranties” so they can move forward after the deal is done without those specific promises hanging over their head, while buyers are interested in a longer survival to be sure they can bring a claim for a breach of seller’s reps and warranties.  My colleague Gregory Fine has published an Alert, detailing how parties often negotiate different survival periods for reps and warranties on general business condition, governmental matters, and “special” or “fundamental” items like capitalization and good standing.

As the Alert advises, despite the parties’ intent, the longer survival periods may not be enforced due to a state’s application of varying statutes of limitations. In healthcare deals, where breaches of compliance reps and warranties can mean significant losses for a buyer—particularly where the buyer may be subject to successor liability—a buyer doesn’t want to discover a breach of a seller’s rep or warranty, only to find that it will not receive the benefit of the bargain it struck because the statute of limitations pre-empted the negotiated survival period.  Luckily, there are tools that can help mitigate these issues—some of which are described in their Alert, like careful jurisdiction selection and drafting. In addition, awareness of these issues while negotiating and drafting purchase agreements during the deal can help prevent unwelcome surprises down the road.

 

 

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Author

Rachel Irving Pitts is an Associate at Mintz. Her practice involves transactional and regulatory matters, including mergers and acquisitions, regulatory compliance review, telemedicine issues, and provider and service contracting matters. Rachel's clients include health care providers and payors.