Representations and Warranties in iGaming Deals
The short answer
Representations and warranties are statements of fact the seller makes about the business in the purchase agreement: that the licence is valid, the revenue figures are accurate, the players were acquired lawfully, the traffic was not bought, and so on. If a statement turns out to be untrue and the buyer suffers a loss, the buyer can claim compensation from the seller.
Warranties do two jobs. They force the seller to disclose problems before signing, and they allocate the risk of anything undisclosed. Diligence cannot find everything, so the warranties are the buyer’s protection against what it missed, and the seller’s main source of liability after closing. Agreeing them carefully, with sensible limits, matters as much as the price.
Representations, warranties and indemnities
| Term | What it is | What happens if it is wrong |
|---|---|---|
| Representation | A statement of fact that induced the buyer to enter the deal | Depending on the law, the buyer may be able to claim damages or, in serious cases, undo the contract |
| Warranty | A contractual promise that a statement is true at signing (and often at closing) | The buyer can claim damages for its loss, subject to the agreed limits |
| Indemnity | A promise to reimburse a specific, identified loss, euro for euro | The seller pays the defined loss, often without the buyer having to prove the usual elements of a warranty claim |
The distinction between representations and warranties matters more in some legal systems than others, and many agreements combine them. Indemnities are different: they are used for known risks, such as a pending tax assessment or a disputed player claim, where both sides know the issue exists but not what it will cost.
How these work depends on the governing law. Your lawyer should explain the effect of each in your agreement.
Typical iGaming warranties
| Area | What the seller typically warrants |
|---|---|
| Authority and ownership | The seller owns the shares or assets and has the right to sell them |
| Licence and regulation | Licences are valid and in good standing; no undisclosed warnings, fines or investigations; revenue comes only from permitted markets |
| AML and responsible gambling | Policies are in place and followed; no known material breaches |
| Financial information | Management accounts and the figures in the data room are accurate and prepared consistently |
| Revenue and platform data | GGR, NGR and deposits reported match the platform and PSP records |
| Players and data protection | Player data was collected and processed lawfully; marketing consents are valid; no undisclosed data breaches |
| Payments | PSP accounts are in good standing; no undisclosed closures, frozen funds or reserve disputes |
| Traffic and search (affiliates) | No manual actions; no undisclosed paid links, private blog networks or bought traffic; traffic figures are genuine |
| Affiliate and operator contracts | Programme accounts are in good standing; no undisclosed changes to commission terms |
| Intellectual property | The seller owns or licenses the domains, content, code and brand; developers have assigned their rights |
| Material contracts | Key contracts are valid; no breach; change-of-control effects are disclosed |
| Tax | Gaming and corporate taxes are filed and paid; no undisclosed disputes |
| Litigation | No current or threatened claims beyond those disclosed |
| Employees and contractors | Contracts are disclosed; no undisclosed liabilities |
| No undisclosed liabilities | There are no liabilities beyond those in the accounts or disclosed |
| Conduct since the accounts date | The business has been run in the ordinary course |
In an asset deal, the list is usually shorter and focused on the assets being transferred. In a share deal, where the buyer inherits the company’s history, it is longer.
The disclosure letter
The disclosure letter is the seller’s most important protection. It lists the exceptions to the warranties: the things the seller is telling the buyer are not quite as the warranties say. A matter fairly disclosed in the letter normally cannot be the basis of a warranty claim later.
What typically goes into it in an iGaming deal:
- A regulator warning or condition, and what was done about it
- A past PSP account closure or a reserve still held
- A period of revenue from a market outside the licence scope
- A Google penalty or traffic drop, and how it was addressed
- Links bought in the past, even if since removed
- A disputed player claim or chargeback case
- A contract with a change-of-control clause
- Any tax question that is still open
The disclosure must be specific enough that the buyer can understand the issue. A general statement that “the data room is disclosed” is often resisted by buyers and may not protect the seller. Prepare the letter alongside the data room, not at the last minute.
Limiting the seller’s liability
Warranties come with limits, negotiated alongside them. These are the usual ones:
| Limit | What it does | What sellers push for |
|---|---|---|
| Overall cap | The maximum the seller can pay for all warranty claims | A cap well below the price for general warranties |
| Fundamental warranties | Title, authority and sometimes tax, with a higher cap, often up to the price | Keeping this list short |
| De minimis | Small claims below a threshold are ignored entirely | A meaningful threshold, so trivial claims do not arise |
| Basket | Claims count only once their total exceeds a set amount | A deductible basket (only the excess is payable) rather than a tipping basket (everything becomes payable) |
| Time limits | How long after closing the buyer can bring claims | Short periods for general warranties; longer only for tax and title |
| Knowledge qualifiers | Some warranties are given “so far as the seller is aware” | Using them for matters the seller cannot fully control |
| Materiality | Only material breaches count | Clear definitions |
| Exclusive remedy | Warranty claims are the buyer’s only remedy, except for fraud | Avoiding parallel claims under general law |
A holdback or escrow often sits alongside these limits, as the practical fund from which valid claims are paid. On larger deals, warranty and indemnity insurance can transfer much of the risk from seller to insurer, at a cost the parties agree how to share.
Practical advice for sellers
- Read every warranty as a question. For each one, ask whether it is completely true. If not, disclose the exception.
- Disclose early. Issues raised in the CIM or data room are already priced in. Issues found later cost more, in price or in liability.
- Do not warrant the future. Warranties should cover facts at signing and closing, not forecasts, rankings or how players will behave.
- Narrow broad warranties. “All revenue was compliant in every market” is harder to stand behind than a warranty limited to the licensed markets, with disclosed exceptions.
- Match the warranties to the structure. In an asset deal, resist share-deal warranties about the whole company’s history.
- Agree limits in the LOI. The cap, basket and time limits are easier to settle before diligence than at the end.
- Keep records after closing. If a claim arrives a year later, you need the documents to respond.
- Use a lawyer. Warranty drafting and limits are legal questions, and their effect depends on the governing law.
FAQ
What are reps and warranties in M&A?
Statements of fact the seller makes about the business in the purchase agreement. If one is untrue and the buyer loses money as a result, the buyer can claim compensation, within agreed limits.
What is the difference between a warranty and an indemnity?
A warranty is a general promise that a statement is true; the buyer must show a breach and its loss. An indemnity is a promise to reimburse a specific, identified loss, usually for a known risk.
What is a disclosure letter?
A document in which the seller lists exceptions to the warranties. Matters fairly disclosed in it generally cannot be the basis of a later claim.
How long do warranties last after closing?
It is negotiated. General warranties often run for a period of months to a couple of years; tax and title warranties usually longer.
What is a warranty cap?
The maximum total amount the seller can be liable for under the warranties. Fundamental warranties often have a higher cap than general ones.
Do I need warranties if I sell an affiliate site?
Yes, but usually fewer. The key ones cover ownership of the domains and content, the accuracy of the traffic and revenue figures, and the absence of penalties or undisclosed bought links.
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