Covering Your Ass: How to Choose the Right Legal Counsel and Seal the Deal

We'll get going on the deck here in just a second. I think my topic is jinxed. The last time I gave a presentation on this topic, the clicker didn't work. I got up here, I had a whole lead-in, I went to advance, and the clicker didn't work. So maybe I should give up and we'll just do Q&A. I'm kidding. Really glad to be here. We're going to chat about legal issues today.

I actually retitled today's presentation from what's in the agenda. We're going to call it Covering Your Ass: How to Choose the Right Legal Counsel and Seal the Deal.

Before we go there, a little anecdote and a little encouragement. Most of you are searchers. Show of hands, who is actively searching right now? Most of the room. Who has a deal under LOI? A few. Operators that have recently closed? A couple.

Last fall, I was part of an insane crew that went to climb Kilimanjaro. It's the world's tallest free-standing mountain, almost 20,000 feet high. I had a lot of self-doubt going into this. I had encouragement from my wife and family, talked a lot with Clint, who was pulling it together. People said it's the most accessible tall peak in the world, just do the training and you're good.

Not everyone agreed. Two weeks after I paid my non-refundable deposit, Clint posted about the trip on Twitter. Some guy commented: 'Since this is a serious question, I'll share a serious personal story. A chubby friend, 33, died of a heart attack on his second day of this hike. Make sure you're conditioned for this.' Stranger on the internet, I can get my head around that.

But closer to home, after the climb I found out a friend of mine going on the trip was texting another friend who is a doctor. The doctor said, 'He isn't making it to the top,' with a laughing emoji. Not strangers on the internet anymore, friends, doctor friends.

I made it to the top. Josh made it to the top with me. Round of applause for Josh. Chase Murdoch was on the trek. Clint was on the trek. Great trip. The point is, this is a really hard process. A lot of people are not going to make it easy on you. First and foremost, yourself. You may be full of self-doubt. Strangers on the internet are going to think you're an idiot. Go post on FinTwit about wanting to buy and invest in an SMB and you're the dumbest person, you know, S&P 500 index funds and chill. It may be people close to you, family, friends, mentors. We heard from Chris this morning, even mentors said iPhone repair, bad idea, I'm out. He killed it anyway.

My takeaway: definitely don't let your legal team become one of those detractors during the search process. If you have a good strategy, don't listen to the detractors, and don't let your legal team become one of them.

The role of a lawyer, and this isn't just limited to lawyers, the role of your service providers is to give you advice, identify risk, and get out of your way. Lisa is nodding. Bankers aren't just advisors, they're gatekeepers to your money, they very well can say this is not a good deal, we're not extending funds. But on professional advisors, Josh and Andy would say the same thing. They give you the reporting, the data, the information you need. There are some compliance boxes to check, but otherwise it's a risk mitigation decision. We advise, we get out of the way.

Take everything with a grain of salt. Ask lots of questions today and during the search process with your advisors. Ultimately, the buck stops with you. It's your final and ultimate decision.

Lawyers are not notoriously deal killers. Bad lawyers who overstep their bounds kill deals all the time. So we're going to start with hire smart. Make sure you're selecting the right lawyer. Easy for me to stand up here and say that's SMB Law Group. We do a lot of these deals. We understand these deals. I promise this is the only sales pitch of the presentation. We're not the only great lawyers. I'd be lying to you if I told you we were, despite being the number one lawyer in Texas.

It's really important to hire the right lawyer for what you're doing. We run into two sides of the spectrum when working opposite lawyers. One is the wrong lawyer by subject matter. One of the best ways to hire the right lawyer is through referrals, but understand the referral source. If you have a close friend in law school whose uncle mentored them, and you ask for a lawyer referral, and they say talk to my uncle, and you pull up Uncle Joe's website and there's fire burning in the background and 'we will fight your traffic ticket to the bitter end,' that's probably not a smart hire for your deal. Very important to hire someone that understands the M&A process.

References. I can count on one hand, having closed 150 deals in the last two years, the number of searchers that ask for references. We have to deal with client confidentiality, it may take a day or two to confirm with clients, but don't be afraid to ask. To the extent you're talking to a lawyer who doesn't want to give you references, that in and of itself is a great vetting question. You don't have to check the references, but if someone won't give you any, that's a red flag.

Neutral closing lawyers. This comes up all the time. The seller and I negotiated the LOI, we just want to hire a lawyer that will paper it up for us and split the cost. That may sound like a great idea. Most of you are self-funded searchers. Legal costs a lot of money. But it is super important when selecting a lawyer to make sure your interests are represented. That fundamentally cannot be the case with a neutral closing lawyer. Brokers have closing lawyer relationships, and while they're 'neutral,' if they are the best friend of the broker who does all of those broker's deals, whose interest do you think they're representing? Do you think they care about keeping a good relationship with you, a one-and-done, or the broker that's their gravy train sending them 20 deals a year? The idea of a neutral closing lawyer is a bit of an oxymoron.

Next, documentation. We see this all the time. Broker form documents. 'Hey, I've got this deal, I sent a draft LOI, and the broker said we don't do LOIs, it wastes too much time. Please review this agreement and sign it.' I open it up and sure enough, asset purchase agreement at the top. PDF fill-in-the-blank form documents, like a $29 will from Staples. Consider the source. Who does the broker represent? If they're feeding you a legal form that's fill in the blank, who do you think it protects? It doesn't protect the buyer.

These documents are woefully inadequate. Make sure you hold the pen on drafting. Sometimes buyers give up because the seller has a great relationship with their lawyer who serves up initial drafts. The biggest problem with broker documents: you can revise them through addendums. We do it all the time. We identify risk and get out of your way. Sometimes clients say, 'Love the deal, I'm happy with the risk profile, let's roll.' We update it as best we can. Every update looks like a change when you send it to the seller.

These broker documents don't favor the buyer. So even very reasonable things like 'this is missing a no-undisclosed-liabilities representation, that should be in every deal, it's an easy give, no seller should ever disagree, it's a standard market representation,' that becomes a big bold blue paragraph in the middle of the agreement when we add it. When you send 14 pages of changes because their three-page purchase agreement is woefully deficient, now you look super aggressive. It can put your deal in jeopardy. We're battling over provisions we'd never even talk about in a normal deal, just because it looks like a change. The seller's uncomfortable, the broker's uncomfortable.

Whether it's a broker document or just the seller holding the pen, resist at all costs. The market is that buyers prepare and serve up the initial draft documents. That's a massive advantage because it flips the script. Now every change the seller makes is negotiating from your very reasonable position as a buyer.

Question: How frequently do you see broker documents?

We see them reasonably frequently. Every percentage I quote I make up but is generally accurate. 10 to 15% of our deals maybe we'll see a broker document. It's also very regional. Certain states have strong brokerage associations who developed these forms. Florida is one. If you're doing a deal under $5 million in Florida, probably 90% chance you'll be asked to use the BBF Florida fill-in-the-blank form.

Hilarious anecdote. I was negotiating a deal that didn't end up closing for other reasons, with a really old crotchety lawyer. He gets on the phone and tells me he's actually the co-president of BBF, the guy that wrote the form. I'm like, oh, I'm definitely not getting changes in this document, but I shot my shot. We did our addendum, our extra provisions, I sent it over, he sent back a massive markup with a three-page indemnity because I asked for a few changes in their nonexistent indemnity. Frustrating. I've closed 2,800 deals in my career, and never once have I had a buyer ask to talk to a key employee before closing. Okay, that's a data point.

Very rarely are buyers successful in not using the form. When you talk to brokers on a good deal, they'll tell you they have lots of potential buyers. If it's a good deal, you just look difficult if you refuse to use the form, and they'll move on. Our job is to walk you through the pitfalls, do what we can to mitigate risk, and let you decide.

Question: At what stage do you present the buyer's prepared purchase agreement?

Spoiler alert, post-LOI. We'll talk about timing more in a second.

Next tip: make sure you're reviewing the documents. I prepare a purchase agreement, we try to be reasonable. These aren't massive deals, they're not 90-page documents, but they're long, intended to protect you as a buyer. You get a 25-page document, I have a number of questions for input. Invariably I know it's coming: 'Well, we're relying on you, just tell us what you want to do.' Wrong approach. It's important to rely on your lawyer if you've hired smart. But it is unbelievably important for you to understand what you're agreeing to. If you find yourself saying 'I don't have time to deal with that issue, just tell me what you recommend,' you're setting yourself up for a problem. You're being asked because it's a reasonably material issue. Do you want a deductible in your indemnity? Do you want to offer it up day one or use it as negotiating leverage? If a claim affects your bottom line, you need to understand it. You owe it to yourself, you owe it to your family when you're taking a personal guarantee.

Don't be afraid to ask questions. If you don't understand, tap the brakes. I get emails from clients: 'Oh, this investor sent me this email, this seems crazy.' And I'm like, we talked about this nine months ago, 17 times. Yes, it's crazy, I told you that, but you really wanted it in your deal, and now it's biting you.

Focus on what matters. Indemnity is probably number one as a buyer. We try to be super reasonable in our approach to the entire document except for indemnity. We're unbelievably aggressive there. Most people aren't hiring smart, and more often than not I can serve up a document where even the seller's counsel is saying, 'I don't even know what indemnity means, let alone a deductible. This sounds reasonable, sure.' All of a sudden the seller has agreed to five-year survival, no deductible, uncapped liability. If you come from an M&A background, you know there's no buyer or seller on planet earth that should ever agree to that. We probably see that in half of our deals. Massive protection for you as a buyer. It alleviates the need to dig in elsewhere. We can look more reasonable in other places because we know how robust the protection is.

Take the time not just to understand your deal, but to understand your seller and their motivations. When we get locked up on a provision and neither side will give ground, it's very often for two very different reasons. If we understand the reasons, you can pull other levers. If the seller is uncomfortable about you being able to take cash out of his pocket, now we can have a discussion about offsets against a seller note. 'Look, we've got a $500,000 seller note. I hope I never have to come back to you for cash. In the unlikely event there's a claim, let's talk about offsetting against the seller note rather than you having to sell your new jet ski.' That's a lot more reasonable. Focus on what matters most for your seller, and usually they'll tell you even if they don't realize it. If you're astute, you can read between the lines and really level up your protections.

Final one: time kills deals. You see this on Twitter all the time. It's true. The longer a deal drags on, the more likely it is to fall apart. It's usually dragging on because there's an issue. It's not just a function of time, it's what time represents.

This is a difficult one to balance: be aggressive but give yourself time. I had a deal that recently fell apart. I don't blame it on time but I do blame it in part on the process. The deal had been dragging on since the fall. I never knew about it. I got pulled in a month ago. They had commitment letters from a lender, done a bunch of due diligence. 'Time to call Kevin. We want to close in two weeks.' I had a very uncomfortable conversation. There's not a snowball's chance in hell I can get it done in two weeks. We agreed I'd try my best for five or six weeks. We were on pace before things fell apart with the seller.

Time isn't necessarily the issue, it's usually indicative of something else. They went through this whole process and brought the lawyer in at the eleventh hour. Turns out there were things in the LOI that conflicted with each other. They hadn't taken the time to understand the LOI, hadn't involved legal counsel to review it. The deal blew up because the seller and buyer thought they were agreeing to two different purchase prices. We can negotiate around a lot of things, but it's tough to negotiate around 'I thought you were paying me 8 million' and 'I thought I was paying you 7 million.'

Question: Why did the searcher decide not to pull counsel in?

Didn't think they needed it. Pushed back on the fee. 'Well, we can do this so fast.' If you ask your lawyer to do things really fast, you're probably not paying the right market rate. They're marking it up for making their lives miserable. It was a reasonably experienced businessperson who thought they could get it 90% of the way there and bring legal counsel in to draft the documents.

Question: What was the price discrepancy, working capital?

No, it was literally a wording change on the allocation between closing and post-closing contingent compensation and timing of payment.

Be aggressive but give yourself time. I do intake calls: 'Just signed an LOI, when are you planning on closing? September.' It's April. I enjoy ample time, but September is a long way away.

There's no right or wrong answer on when to engage legal. Two weeks before your anticipated closing is not the appropriate time. We also counsel clients quite often after they go under LOI to wait to engage us. Think about what kills a deal. It's almost never legal issues. People say lawyers kill deals because they're bad lawyers. It's very rarely a legal issue that blows up a deal. Almost all legal issues can be negotiated or documented around. People are pretty reasonable. 'You've got pending litigation and this is a stock deal, so we inherit your litigation. If we lose money in litigation, you've got to pay us.' That's pretty reasonable.

What you can't document or negotiate around is valuation and purchase price being different. There's no provision I can put in the agreement to make a million dollars appear. The financial and business matters are the ones that tank your deal. We encourage folks, as soon as you can post-LOI, go as deep and fast as you can on business and financial diligence to smoke out issues. If you can crank on quality of earnings immediately after LOI and figure out in two or three weeks that EBITDA was grossly misstated, they were playing too many games with add-backs, and you've got to renegotiate the purchase price, that's really good to find out three weeks in without having engaged a lawyer.

Front-load what matters most. QoE and financial diligence, hugely important. Significant component of business diligence, hugely important. If you find out low customer concentration is because there's a conglomerate doing business through seven different subsidiaries that didn't look on paper like one customer but is actually 70% customer concentration through a web of subsidiaries, that would be really good to know a week after LOI rather than eight weeks after LOI. Yes, I've seen this happen. Front-load as much as you can.

Lisa, keep me honest. With an SBA loan, from LOI to closing is generally between 60 and 100 days. 90 days is fair. So if you take two, three, even four weeks to launch QoE, you're getting a healthy QoE report, working hard with Lisa on underwriting, financial models looking good, getting ready to submit to underwriting, some business diligence, business looking good, vendor relationships look good. Now it's time to bring in legal. You've already spent $10,000 to $30,000 on QoE before spinning up legal. You've checked a lot of boxes. You've de-risked the likelihood of your deal blowing up after spending money on legal. We're usually engaged in that two-to-four-week post-LOI period and usually closing roughly 60 days after engagement.

If you engage QoE, insurance diligence, HR diligence, and legal cranking three days post-LOI, and find out seven weeks later EBITDA is misstated and you have to walk away with $55,000 of transaction expenses, how many of you can survive that to your second search? That's why I say be aggressive on timing but give yourself appropriate time to get the deal done right. We have clients that have spent 15 years in a corporate job saving up $100,000 to buy their dream business. They lose $50,000 to $60,000 on a busted deal and don't have resources to chase the second one. Back for another decade, or they have to pivot their model and raise more money.

Question: How do these buyer-side legal arrangements work for busted deals?

This is not the private equity space. In PE, they have rolled fees. KKR does a deal, racks up a quarter million in legal fees, deal falls apart, their annual legal budget is $122 million, so $250,000 of busted deal fees is not the end of the world. The big firms say, 'You're a big client, we'll roll your quarter million to the next deal.' Their next deal racks up a million, closes, they get an invoice for $1.25 million.

We just can't do that. Firms in this space are like all of you. If a $50,000 hit could be catastrophic to your balance sheet, that doesn't work for us either. So firms have to get creative. Two main options. One is some sort of hybrid. The other is no discount: we billed 50 hours, your deal fell apart, here's your invoice for 50 hours. Or a discount for busted deals: 25% off, here's your invoice.

We do a different hybrid. Our practice is entirely fixed fee. Most lawyers bill by the hour. We charge small monthly progress payments throughout the transaction. So if your deal falls apart in week six after engaging SMB Law Group, you've got two progress payments in. We waive the balance of the fee. If you're a $50,000 fee and you've made two progress payments of $15,000, maybe we've done 80% of the work, but that's an indirect discount.

Whether you hire us or another lawyer, don't be afraid to ask. 'I'm a self-funded searcher. This is money out of my personal bank account. I'm nervous about a deal falling apart and getting hit with massive fees. What can we do?' If they're an hourly shop, try to negotiate a discount.

Question: Have you seen sellers cover busted deal costs?

Very rarely. The seller's small business has little appetite for fees. We see it occasionally, particularly with strategics. Several clients doing roll-ups have more negotiating leverage. One client is super creative. Every LOI has reimbursement of the QoE report if QoE returns EBITDA off by a larger margin than 10%. We recognize there's going to be some variance, but if you're way off, like you misrepresented financials to get the deal under LOI, we want our QoE fees back. They push hard for it.

Question: Should you hire a lawyer for the LOI?

Guess what my view is. The sales answer is absolutely. The true answer is it depends, and it's risk appetite. Our job is to identify risk and get out of the way. If you're a private equity professional who's closed 40 M&A deals and now you're buying your own business, have at it. You've probably looked at or negotiated 400 LOIs. For most people, particularly first-time buyers, there's a lot you can do. Take my anecdote of the deal that just fell apart. I fundamentally believe we'd be closing that deal in two weeks if legal had been involved at the LOI stage, because it was a mismatch on what they thought was going into the LOI. That could have been ironed out with high-quality counsel. We highly encourage it because you can solve a lot of headaches down the road, particularly in the SBA space. I tell my private equity friends, you may still want a lawyer because you can negotiate the world's greatest earnout in your LOI only to find out you can't do an earnout in an SBA deal.

Sam adds: a practical tip. If you don't feel comfortable drafting and negotiating an LOI on your own, which is completely normal, get help on the first one. Work with your counsel. Draft, comment, learn, see where the risk is and where mistakes typically are. Then maybe do it on your own the second time with the form from the first.

I know I said no more sales, but the way we solve that, because we hate billing hours and love fixed fees, we do fixed fees. $1,500 up to five hours to get the LOI done. The vast majority of LOIs are done in less than five hours. We've started putting the cap because there's the occasional LOI where they want to negotiate the entire document in the LOI. We make it almost a loss leader because we know the space and want incentives aligned with getting to the closing table. We don't want to get rich off LOIs.

Question: Do you roll part of the busted-deal payment toward the next engagement?

When a deal falls apart, it's an indirect discount on the fixed fee. We're a time-based profession. If we've done 50 hours of work, rolling that forward means we never got paid for those 50 hours. That business model can't work. At big firms where they can carry the nonpayment, they're still getting 100% of the payment when the next deal closes. We don't credit because effectively we'd never get paid. We will get creative if a deal comes back alive. Three months later, cooler heads prevailed, we'd get creative there.

Question: Any nuances on timing for proprietary deals versus broker deals?

Not in terms of engaging counsel. It affects lead time getting the deal done, but once you're under LOI, it largely operates the same. Assuming a good broker like Jackie or Clint is involved, they do a lot of transaction management. Without a broker, even immediately post-LOI you may want to bring legal on because they can run interference and start working with the seller's counsel. When the seller says, 'You want access to my QuickBooks file? Hell no,' that referee can help. Otherwise, all the same considerations.

Question: What should a searcher budget for legal?

We usually tell people to budget 1% to 2% of enterprise value, no matter the billing model. Our fixed fee isn't a cash grab, it's an indirect approximation of time. Generally in line whether you're working with a fixed-fee shop or an hourly shop. If you're seeing a quote under 1%, unless it's a fixed fee, there's very little likelihood you're actually going to get the deal done there. We see it all the time. People love fixed fees because of this. 'My friend on his deal seven months ago was quoted $30,000, got to closing, and the invoice was $58,000.' If you haven't planned for that, it can be catastrophic. A lot of lawyers under-pitch when billing hourly to win the work, and at the end of the day the bill is what it is.

Question: Standard market hourly rate?

Pretty varied. For a good experienced M&A lawyer in the small business space, anywhere between $300 and $800 an hour. There are more expensive lawyers that are overkill. There's leeway. If you're in Tonka, Minnesota working with a local lawyer, even an experienced M&A lawyer is just going to be a lower fee. Back of the napkin: $4 million deal, expect legal $40,000 to $60,000.

Question: How to navigate when the seller's lawyer is inexperienced, especially in proprietary deals?

I wish I had a good answer. There's a lot of leverage you can pull, but the response is so varied. Some sellers are super open. Those are my favorite, they'll ask if there's anyone else, and I can recommend a firm I've worked opposite that's easy to work with. Sometimes they take it personally, especially if they did the same referral thing and it's their uncle's frat brother. When you find out the guy is a personal injury lawyer and you tell the seller, 'This guy has no idea what he's doing, fire him and hire a real lawyer,' now you've affected him because his favorite uncle's frat brother. Understand the dynamic. Some sellers don't react well, others are open. Hopefully a good broker is involved, and I'd ask the broker to mediate. 'Look, this guy is a personal injury lawyer. This is going to be a nightmare for everybody. Can you nudge the seller?' Occasionally we're successful. My favorite is when they don't have counsel and ask for a recommendation.

Question: What differentiates SMB Law Group from competition?

Thank you for that softball. Our model is a big one. We're fixed-fee, totally transparent. We don't do anything by the hour. Not everyone loves that. We lose clients who say, 'I'm a savvy consumer of legal services. I think I can control costs by being hourly.' That's great, we're not the firm for everyone. Experience is a big one. Part of the reason SMB Law Group exists is because there weren't a lot of M&A specialists. We're not technically supposed to use that word, experienced M&A practitioners. All of us at SMB come from big shops where we've done billions of dollars of M&A. We've been through the gauntlet. That brings sophistication down-market.

That can also be a downfall when interviewing lawyers. Really sophisticated lawyers can be a hindrance. It's not just being good at M&A, it's being good at M&A and a good business partner who understands SBA and small business. I recently closed a $4.5 million purchase price with a credit facility that had some dry powder, slightly larger credit facility, $275,000 legal bill from the bank's counsel. In the debt world, the borrower pays the lender's counsel. My client, a little bootstrap small business, had a $275,000 legal bill in addition to ours. The bank got a big firm involved and cost got out of control. Experience can also be a detriment. Our secret sauce is we're entrepreneurs as much as we are lawyers. We understand where you sit. We use a fee arrangement that's super clear, super transparent, zero surprises. You know exactly what the number's going to be on your closing statement.

Question: Where do you practice?

We practice all across the country, with a caveat that if it's not one of these states, occasionally questions of state law come up where we need to engage a local lawyer to opine on something. That's fairly rare. The light blue are pending. I'm pending admission in Utah. My partner Jake is pending in Illinois. The dark blue are active. Most of the big ETA states. We're chasing some others, hopefully Washington soon. We'll still do deals across the country, but if it's an Oregon labor issue we may bring in an Oregon labor lawyer.

Question: Can you spend more time on the indemnity and deductible concept?

Really high level, you know what a deductible is from health or auto insurance. The indemnification provision is your insurance provision in the purchase agreement that says, if any of these things you've represented about the state of your business turn out to be wrong, we are able, and this is important, and you're harmed by it, to recover. I get asked this all the time: 'That was wrong, I should get money back.' If it's wrong but doesn't cost you money, there's no damage and no claim.

Classic example: stock deal, you inherit prior liabilities. A customer files a lawsuit nine months later about something that happened two years ago. You're a roofer and you damaged their roof, flooded the attic, ruined the house. They sue for $500,000, predates the purchase. You have an indemnification provision saying nothing has happened that could result in litigation prior to closing. That turned out to be wrong, you're damaged, you got sued and lost $500,000. Putting aside insurance, you go collect $500,000 from the seller, hopefully.

The deductible works like any insurance. $50,000 deductible means you recover $450,000. The first $50,000 you eat. There's a variant called a tipping basket. $50,000 deductible, but once you hit $50,000 it tips back to dollar one and you recover everything. Example: $50,000 tipping basket, you get sued for $40,000 in damages, no recovery. Get sued a second time for $100,000, now you recover $140,000 because the $100,000 makes up the $10,000 difference, you hit $50,000, it tips back to dollar one and you recover all losses. Those are the two mechanisms, deductible or tipping basket.

All my statistics are made up but directionally accurate. Roughly half of our deals there's no deductible or tipping basket. That's something we can get away with because of unsophisticated counsel, but in the M&A world they're generally common.

Other avenues. One is straight, you chase the seller for cash. Another is offset to the seller note. With a $500,000 seller note, you offset $140,000 against the note, principal is now $360,000. That's our preferred way. Not ideal, but preferred because when you close and the seller gets $3.5 million in their bank account, what happens? In 90% of cases that money is gone, tied up in a Breckenridge house and a yacht. Not a lot of assurance you can collect cash. We always push hard for note offset, but make it discretionary at the buyer's discretion if unable to collect from the seller. So if they're judgment-proof or just being difficult and you don't have the bandwidth to sue your seller, you can offset the note.

Question: Is the offset off the back end or re-amortized?

Usually off the back end, off the principal balance. Occasionally we negotiate to reduce immediately and re-amortize, but sellers usually resist. Often there's a balloon, so it gets pulled off the back.

The other reasonably common way, more difficult in an SBA deal, is an escrow. You take a percent of the purchase price and deposit it in a third-party escrow account for however long you can get away with as a buyer. Usually you're talking escrows because you've got a sophisticated seller and counsel pushing market terms, generally 12 to 18 months of survival on representations and warranties. There's usually a cap on indemnity for non-fundamental breaches. The typical market is escrow at half of that cap. If capped at 15% of purchase price, you usually deposit 7.5% in escrow for the 12 or 18 months so the money is isolated in a third-party account. If there are damages, you're not clawing back against the seller, it gets released from escrow.

We're over time. We'll cut it there and grab lunch. If you want to chat more about indemnification caps and fundamental reps, I'd love nothing more.