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Corporate M&A: warranty disclosures

Warranty Disclosures

Built for how lawyers work, Legatics eases the laborious and error-prone manual handling of warranty disclosures with Word tables. By managing your M&A transaction on Legatics, you can run your matter with seamless efficiency that ensures a smoother, faster, and error-free approach to transactions.

The challenge: traditional warranty disclosure process

In summary, a warranty disclosure serves as a tool for the seller to disclose exceptions and limitations to representations and warranties about the company being sold, helping allocate risks between the parties and facilitating the negotiation and resolution of issues during the due diligence process.

Typically this process is managed in a Word table. The Seller would convert the warranties found within the SPA into a table containing the clause reference number and the text of the warranty.

A disclosure letter is then compiled to contain the warranties with any information that must be disclosed to the buyer. This is key as if the disclosures are not accurate the buyer could sue the seller. There are several drawbacks to using Word to manage this process, however:

  • Time – manually creating a Word table, especially for complex warranty disclosures with numerous items and categories, can be extremely time-consuming. Lawyers may need to input large amounts of data, including detailed descriptions of risks and liabilities, into the table, which can be tedious and prone to errors.
  • Formatting – ensuring consistent formatting throughout the warranty disclosure document is crucial for readability and clarity. Manually creating a Word table increases the risk of formatting inconsistencies, such as uneven column widths, inconsistent font styles, or misaligned rows, which can detract from the professionalism of the document.
  • Version control – in a collaborative environment where multiple team members may be involved in reviewing and editing the warranty disclosure document, manually created Word tables can pose version control challenges. Without robust version control mechanisms in place, it can be difficult to track changes, reconcile conflicting edits, and ensure that all stakeholders are working with the latest version of the document.
  • Risk of error – manually inputting data into a Word table increases the risk of typographical errors, data entry mistakes and inconsistencies in the disclosure content. These errors may go unnoticed during the drafting and review process, potentially leading to inaccuracies in the final document and undermining the integrity of the disclosure.
  • Lack of scalability – for large-scale M&A transactions involving extensive warranty disclosures, manually creating Word tables may not be scalable or efficient. Lawyers may struggle to manage the volume of data and maintain consistency across multiple tables and sections of the document, resulting in delays and inefficiencies in the drafting process.

How can Legatics be used to manage this process more effectively?

Importing & templates: lawyers can easily import legal text to create and manage a list with a few clicks. The ability to template a warranty disclosure list saves time and effort in drafting. Lawyers can leverage templates as a starting point and customise them to fit the specific needs of the M&A transaction, reducing the need to start from scratch.

Real-time collaboration and feedback: Legatics facilitates real-time collaboration and feedback among team members, allowing lawyers to communicate seamlessly and address comments and revisions efficiently. This promotes transparency and ensures that all stakeholders are kept informed throughout the drafting process.

Version control and audit trail: robust version control and audit trail feature tracks all version changes made to the warranty disclosure document including comments, status changes and approvals. This ensures accountability and enables lawyers to monitor the evolution of the document over time, reducing the risk of errors and inconsistencies.

Permissions: granular permissions control who can view specific items within a list or a list in its entirety. For example, you may want to only grant internal access whilst compiling the warranties, then bring in the seller for review and finally buyer at a later stage. This can be achieved without the need for multiple email threads / documents.

Exporting: easily export the list and attach to a disclosure letter in a clean format with branding applied.

Benefits of streamlining your warranty disclosure process

Time Saved
The users responsible for creating the warranty disclosure list save time doing this in Legatics by using a template and not having to copy and paste from different places (emails/Word table).

Bulk status assignment allows the lawyer to easily assign rows to parties, organisations or Users, which is helpful for reviewing.

Word / PDF export allows for a finalised list to be filtered and exported. This is helpful for generating as an annex which can be attached to the disclosure letter.

Improved Clarity
The list is kept up to date in real time. This removes the reliance on a single person / team having to manually update responses in a Word / Excel tracker. It also acts as a single source of truth.

Version Control
All versions are uploaded directly to Legatics so there is no confusion caused by multiple files sent back and forth via email. Users will be able to see when files were uploaded and by whom and all versions will be attached to the relevant row.

Errors Reduced
Responses are added straight into Legatics which reduces the need for copy and pasting. This helps reduce the risk of responses being pasted against the wrong warranty. If things do go wrong, users have a full log on the audit trail to correct any mistakes.

How it works in Legatics

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