Reps & Warranties: Brokers
Essential Question:
Will you be required to pay anyone for putting the deal together after closing?
In Brief:
Information regarding relationships the Seller has with business brokers and other third-party transaction advisors.
Category: Continued Diligence & Fact-Finding; Risk Allocation
What is it?
Assuring the Buyer that if a third party claims a right to some portion of the Purchase Price based on an agreement with the Seller, it will be the Seller’s responsibility to resolve the claim.
When does it matter?
If a broker’s fee is not paid by the Seller, it can result in a lien on the Business, which will undoubtedly cause headaches for the Buyer.
What to look out for?
This can become a problem even if the rep is included, so you’ll probably also see, in addition to this representation, a post-Closing statement from the broker indicating that its fee has been paid in full.
