Reps & Warranties: Inventory
Essential Question:
Is the inventory usable, salable, obsolete, not moving, co-signed, at a different location?
In Brief:
What inventory is there?
Where is it located?
Is it in good condition?
Are there any limitations to its sale?
Category: Continued Diligence & Fact-Finding; Risk Allocation
What is it?
Assurance that the inventory at close is consistent with what it takes to run the business, and that that inventory is free from any encumbrances that would prevent it from being sold.
When does it matter?
If inventory is an essential part of the Business, the Buyer wants to ensure that the inventory referred to is sufficient to satisfy customer needs and expectations.
What to look out for?
Focus on where your biggest risks are. Have a conversation with your counsel early to indicate what’s important to you and to put your efforts there during negotiations.
