Indemnification

An Indemnification is an agreement to compensate a party for loss or damage that may occur. A common form of indemnification is an insurance policy. In the M&A context, a seller may agree to indemnify a buyer for claims that a third party may bring against the buyer for events that happened before the buyer buys. Indemnification provisions tend to be heavily negotiated because whereas buyers commonly want complete protection from events that did not happen on their “watch,” sellers commonly want a “clean break.”