Auto Aftermarket Indemnification: An Independent Sponsor's Counsel
Drafting Indemnification on auto aftermarket deals, with the structure protection and capital connectivity an independent sponsor actually needs.
Auto Aftermarket deals in the lower middle market run a specific playbook. Indemnification is where the structure either holds or starts to leak.
The typical auto aftermarket platform sits at $8M to $90M EV with EBITDA in the $2M to $16M range. The thesis runs on service-center or specialty-shop regional roll-ups. Technician shortage is the single biggest valuation risk. Underwrite the bench, not the bays.
How Indemnification actually gets structured.
Set general indemnity survival at 18 months, fundamental reps for the full statute of limitations.
Build a basket at 0.5 percent of EV, with a deductible structure, not a tipping basket.
Cap general indemnity at 10 percent of EV, with R&W insurance carrying the layer above.
Carve out fraud, tax, and intentional breach from any cap.
In auto aftermarket, layer in technician retention pool defined and funded as part of the Indemnification workstream.
Negotiating caps and baskets without first reading the disclosure schedules. The schedules dictate the real exposure.
"Indemnification only matters when the deal goes wrong. Draft it as if it will."Jason Powell · Indemnification
The deal is one thing. The capital that opens up after close is another.
After close, the call list for refinancing, recapitalization, and growth equity gets short and known. Jason carries that list.
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An LOI on the desk, a auto aftermarket target, and a Indemnification question worth a real conversation.
Twenty minutes of practitioner-grade input from a securities attorney whose first move is to read the deal, not the engagement letter.