Final answer:
An indemnification provision in a business combination agreement limits the acquirer's liability associated with specific assets or liabilities.
Step-by-step explanation:
An indemnification provision in a business combination agreement limits the acquirer's liability associated with specific assets or liabilities. This statement is true.
When two companies combine in a business combination, there may be potential risks and liabilities associated with the acquired assets or assumed liabilities.
An indemnification provision is included in the agreement to allocate and limit the acquirer's liability for certain specified risks.
This provision helps protect the acquirer from unforeseen financial losses and ensures that they are not fully responsible for any liabilities that existed prior to the acquisition.
For example, if a company acquires another company and later discovers that the acquired company has pending legal claims, the indemnification provision can limit the acquirer's liability for those claims. Instead of being fully responsible for the legal fees and potential damages, the acquirer may only be liable up to a certain predetermined amount.