A contractual guarantee in an M&A context refers specifically to the representations, warranties and indemnities given by the seller in the SPA — the seller's commitment that specific statements about the company are true and that the buyer will be indemnified for any losses arising from their inaccuracy. Key parameters negotiated include: the basket (minimum threshold before claims can be made), the cap (maximum aggregate liability), the survival period (time limit for claims), and the disclosure letter carve-outs. Their scope and calibration directly determines the buyer's effective post-closing protection.

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Example: in a CHF 20.0 million acquisition, the SPA warranty package includes a CHF 100,000 basket (0.5%), a 25% price cap (CHF 5.0 million), and 2-year general warranty period (5 years for tax warranties). Post-closing, a CHF 350,000 environmental liability surfaces. The buyer's net recovery: CHF 350,000 - CHF 100,000 (basket) = CHF 250,000 — within the cap. The specific scope of the environmental warranty and the seller's knowledge at signing determine enforceability.

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Hectelion advises on warranty scope, basket, cap and survival period calibration in every M&A transaction to optimise buyer protection and seller risk exposure.