S&C corporate partner and co-head of the Global Private Equity Group Rita-Anne O’Neill explained the importance of clarity in drafting materiality scrape provisions in a video interview for the ABA’s Market Check training series. In the video, Rita points out that it is important to determine whether a scrape provision is going to include damages only, or breach as well as damages. If covering both is important, she says, “it’s very important to make sure that you draft the provision clearly.” Rita adds that situations often arise “where people thought they were scraping both for damages and for breach, but really the drafting was not clear.” To avoid this, she suggests that the provision “should be very simple and say ‘the materiality qualifiers…are disregarded for purposes of calculating damages and for determining whether a breach has occurred.’”
“It doesn’t need to be fancy, it doesn’t need to be extensive, it just needs to be crisp in terms of both damages and for breach,” Rita says.
The video is a co-production of the American Bar Association’s M&A Committee and Hotshot Legal. Rita is the former Chair of the ABA’s M&A Market Trends Committee. She is the current chair of the ABA’s Women in M&A Subcommittee and the Acquisition of Public Companies Subcommittee.
To view the full video and others in the series, visit: www.ambar.org/blshotshot