Cybersecurity Services Indemnification: An Independent Sponsor's Counsel
Drafting Indemnification on cybersecurity services deals, with the structure protection and capital connectivity an independent sponsor actually needs.
Cybersecurity Services deals in the lower middle market run a specific playbook. Indemnification is where the structure either holds or starts to leak.
The typical cybersecurity services platform sits at $10M to $130M EV with EBITDA in the $2.5M to $22M range. The thesis runs on MSSP or specialty consulting platform. Cleared workforce is the moat. Cleared workforce can also be the deal-killer in CFIUS reviews.
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 cybersecurity services, layer in FSO succession plan in place 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.
Most independent sponsors solve the closing capital and then run into the post-close capital problem alone. The capital markets relationships that matter at month 18 are part of this practice.
Related deal pages.
Transaction Fee Structuring for Cybersecurity Services
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Working Capital Adjustments for Cybersecurity Services
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Representation & Warranty Insurance for Cybersecurity Services
A buyer-side insurance product covering breach of seller representations, reducing seller escrow and indemnit…
Quality of Earnings for Cybersecurity Services
The buyer's accounting diligence report normalizing earnings, working capital, and pro-forma performance.
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Indemnification for Home Services
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An LOI on the desk, a cybersecurity services 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.