The private M&A market of 2025 was a market of recalibration. After several years in which seller-friendly terms — compressed timelines, limited indemnities, broad R&W insurance reliance — became standard, buyers have reasserted leverage as deal volumes normalized and capital costs remained elevated.

For founders and closely held business owners contemplating a sale in 2026, this shift has significant practical implications — particularly around representations and warranties, indemnification structures, and the role of R&W insurance in bridging the gap between buyer and seller risk appetites.

What Has Changed in the Post-2025 Market

The most significant development is the tightening of R&W insurance terms. Through 2022 and into 2023, sellers were routinely able to negotiate deals in which the R&W policy was effectively the sole remedy for most breaches, with seller-side indemnification limited to a small percentage of deal value and a narrow set of "fundamental" representations.

That structure is no longer standard. In today's market, buyers are increasingly requiring:

  • Enhanced seller indemnification — often 10–15% of deal value versus the 1–3% that became common at peak
  • Longer survival periods for key representations, particularly in areas of elevated regulatory scrutiny
  • Broader carve-outs from R&W coverage for known risks identified in diligence
  • More aggressive "sandbagging" provisions that preserve buyer rights regardless of pre-signing knowledge
  • Tighter disclosure standards, with less tolerance for "knowledge" qualifiers that functionally limit rep scope
"The terms you accept in a purchase agreement define your exposure for years. Getting them right is not a negotiating nicety — it is the difference between a clean exit and a costly reckoning."

The Practical Impact for Sellers

For sellers — and particularly for founders who may have little prior M&A experience — these shifts mean that the sale process demands more intensive legal preparation than it did two or three years ago. Diligence readiness matters more, representation accuracy is more consequential, and the negotiation of indemnification caps, baskets, and survival periods deserves as much attention as the headline purchase price.

We have seen a pattern in recent transactions where sellers focused almost entirely on the economic terms — enterprise value, working capital mechanics, earn-out provisions — while accepting indemnification language that meaningfully eroded the economics of the deal after closing. This is an avoidable outcome.

Key Areas of Focus for Sellers in 2026

1. Disclosure Discipline

The quality of a seller's disclosure schedule is one of the most important determinants of post-closing risk. A disclosure schedule that is carefully curated, accurately reflects known issues, and is reviewed with experienced counsel before signing provides meaningful protection. One that is rushed, incomplete, or treated as a formality does not.

2. Understanding the Insurance Policy

R&W insurance policies are not standardized instruments. Exclusions vary materially between carriers and policies. Before assuming that a policy provides comprehensive coverage, sellers and their counsel must understand exactly what is excluded — and ensure that the indemnification structure is designed accordingly.

3. Escrow and Retention Mechanics

The size, duration, and release mechanics of any escrow or purchase price holdback deserve careful attention. Sellers should understand not only the nominal escrow amount, but also the conditions under which it will be released and the claims process that governs disputes.

Our Guidance

Founders and business owners contemplating a sale in 2026 should engage experienced M&A counsel well before a formal process begins. The time to identify and resolve legal issues that could become negotiating liabilities — cap table irregularities, IP assignment gaps, employment agreement deficiencies, regulatory compliance questions — is before a buyer's diligence team identifies them first.

The firms that achieve the cleanest exits in this market will be those that arrive prepared. We would welcome the opportunity to discuss your specific situation and help you position for the strongest possible outcome.