The following article aims to provide an overview of current trends in the contractual agreement of risk allocations in the relationship between seller and buyer in a company purchase agreement. The agreement on which method is chosen depends in particular on the circumstances of the individual case and the negotiating power of the respective parties. Therefore, there are rather no fixed rules, but different techniques that have developed in practice.

Individual risk allocations in favor of the buyer and at the expense of the seller

• Purchase price

A purchase price discount is a tool that is not infrequently used to reduce the value of an anticipated risk. The purchase price discount leads to an anticipation of the occurrence of the risk (possibly with a certain probability) for negotiation purposes. The potential future loss, a materialization of the risk, results in a purchase price discount that directly benefits the buyer, regardless of whether a loss event actually occurs. If the risk materializes in the future, further possibilities for recourse on the part of the purchaser are generally excluded in the event of a purchase price discount (avoidance of a so-called double dip).

• Guarantees/ Warranties

Guarantees or warranties are the "classic" instrument in a company purchase agreement to protect the buyer from certain risks relating to the company or its shares. As a rule, guarantees describe a target state that exists at signing or closing (generally not afterwards!). If the actual state deviates adversely from the target state, the risk materializes. In this case, the seller must usually provide in rem restitution and/or compensation.

• Exemptions

Exemptions are particularly common in the area of taxes, but also environmental risks or other risks specifically identified during due diligence. In deviation from guarantees/warranties, the seller assumes vis-à-vis the buyer the risk of future burdens on the company, e.g. for future tax payments that arise retrospectively for assessment periods that have expired at signing or closing.