Independent Sponsor Indemnification in Specialty Distribution
Securities and M&A counsel for independent sponsors drafting specialty distribution transactions, from LOI to close to the capital markets that open up afterward.
Indemnification on specialty distribution deals is one of those workstreams that looks routine on a checklist and decides outcomes in practice.
The typical specialty distribution platform sits at $10M to $100M EV with EBITDA in the $2.5M to $18M range. The thesis runs on vertical buy-up of niche product distributors. Most distribution multiples are wrong by half a turn until the rebate accounting gets normalized.
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 specialty distribution, layer in supplier reaffirmation letters before LOI signs 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.
Related deal pages.
Transaction Fee Structuring for Specialty Distribution
The fee paid at closing to the independent sponsor for sourcing, structuring, and closing the platform deal a…
Working Capital Adjustments for Specialty Distribution
The closing-date true-up that protects the buyer from receiving a business stripped of normal-course working …
Representation & Warranty Insurance for Specialty Distribution
A buyer-side insurance product covering breach of seller representations, reducing seller escrow and indemnit…
Quality of Earnings for Specialty Distribution
The buyer's accounting diligence report normalizing earnings, working capital, and pro-forma performance.
Indemnification for Healthcare Services
roll-up of physician practices and ancillary service lines
Indemnification for Home Services
regional roll-ups of HVAC, plumbing, and electrical operators
An LOI on the desk, a specialty distribution 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.