August 21, 2003
EXACTLY HOW DO YOU QUANTIFY
EXACTLY HOW DO YOU QUANTIFY DOUBLE MATERIALITY (A/K/A THE METAPHYSICAL ASPECT OF M&A)?
Why would you want to, you ask? Isn’t materiality already something where reasonable minds might differ without doubling up on the concept, you ask?
Well, ponder this …. fully 35% of the transactions we reviewed (see parameters below) applied a test of materiality in individual seller reps and warranties and then again in the condition usually entitled “Accuracy of Representations and Warranties” (i.e., the “bring down” walk right). How wrong can a seller be when “double materiality” is applied to a rep in the context of a walk right? Some might say “completely!!”
Parameters: In our recent Deal Points Study we reviewed acquisition agreements relating to public company acquisitions of private companies with transaction values of between $25M and $150M (pulled from the LiveEDGAR M&A Database).
(Comments? Gripes? Pls feel free to email us: wilson.chu@haynesboone.com or lglasgow@gardere.com )