MERGERS & ACQUISITION
INSURANCE
Whether it be a seller fund looking to minimise its liability on exit or a buyer concerned about the financial covenant of individual sellers, with the help of our partners at Lloyd’s of London, we can work with you to provide the security you need to facilitate the deal.
M&A Insurance is designed to protect the buyers, sellers, lenders or guarantors in a private M&A transaction against the financial loss they suffer from breach of representations, warranties and indemnities given by the seller(s) in a Share Purchase Agreement (SPA).
WARRANTY & INDEMNITY / REPRESENTATIONS & WARRANTIES
INSURANCE
SCOPE OF COVERAGE INCLUDES:
Loss arising out of a breach of warranties under the SPA
Loss arising out of a tax indemnity under the SPA
Loss arising out of an insured specific indemnity under the SPA
Defence costs
Seller fraud (when insuring the buyer)
Liability periods to match those in the SPA (typically 2 years for general warranties and 7 years for tax warranties and the tax indemnity)
WHY CONSIDER W&I / R&W INSURANCE?
Where the financial covenant of the seller is inadequate (e.g. highly indebted)
When sellers are in unattractive jurisdictions and enforcement or recovery may prove difficult
If the seller is likely to wind-up and distribute proceeds of the sale
Where the Investment Committee or Lending Bank require insurance as an alternative or supplement to the protection provided by the seller(s)
As an alternative to an escrow or hold-back
To give institutional sellers (funds, trustees, liquidators and administrators) a clean exit
When there are multiple sellers and claiming may prove costly and time consuming
To enhance a potential buyer’s bid in an auction process