This Practice Note is part of the Lexis+® UK Corporate private equity buyout transaction toolkit.

The disclosure process involves the preparation of separate disclosure letters by the seller and by the target’s managers, which will be finalised and signed at exchange.

The disclosure letters serve a separate purpose to due diligence, even though both involve providing information concerning the target to the private equity investor and ultimate buyer. It allows the seller and managers to qualify their respective warranties set out in the warranties schedule of the formal documents and thereby limit potential liability under them. If, following a buyer's claim for breach of warranty under the share purchase agreement, a matter can be shown to have been disclosed to the buyer (meeting the standard of disclosure described in the formal documents), the buyer's warranty claim will not succeed.

By contrast, the warranties in an investment agreement, which are typically given by target management, are used primarily to focus the attention of the managers on disclosure of key information to the investor, ie the