Warranty and indemnity (W&I) insurance has become a valuable tool for mergers and acquisitions (M&A) deal facilitation employed by both private equity firms and strategic buyers and sellers. It is used by buyers &and sellers offering cover for representations, warranties and indemnities, contingent tax, and other M&A liabilities.
By shifting risk to the insurer, warranty and indemnity insurance products are structured to protect against financial loss arising and M&A agreements. Available to both parties in a transaction, our policies can minimise seller liability on business exit, enhance bids by potential buyers and bridge differing indemnification expectations.
While the timing, size and investment strategy behind each portfolio varies, every business looking to purchase add-ons to their platform companies wants a streamlined, efficient process. Having to negotiate a new insurance policy for each acquisition adds unnecessary time and cost. We can access W&I cover that gives buyers and sellers the certainty they require behind each transaction.
Smaller transactions, such as portfolio add-ons are often unnecessarily uninsured due to historic issues around complexity, which have now become perception. However, these risks are now easily insurable with solutions structured to work on the smallest of add-on acquisitions, with no minimum premium needing to be purchased and no minimum transaction size.
We can arrange coverage that agrees a master policy wording at the time of the primary platform acquisition and add on endorsement once each subsequent acquisition is completed. An aggregate policy limit can be agreed upfront based on the anticipated combined enterprise value of the portfolio, or individual policy limits can be agreed for each deal if add-on acquisitions have not yet been identified.
The solution can be structured in a number of ways but offers the potential for one limit, one premium, one fee and one aggregate retention across an entire portfolio of companies. It negates the need for individual policy negotiations, delivering a significantly more efficient process for smaller deals. An added benefit for you is acquisitions are covered by a partner you know and trust.
Bespoke cover - Each policy is tailored to a specific M&A transaction, ensuring that cover is flexible enough to address the specifics of the deal.
Breach of warranties – W&I policies provides cover for financial loss or liability arising from a breach of a representation or warranty in an M&A acquisition agreement.
Clean exit - Help minimise the impact of post transaction claims against the seller by the buyer, which can allow a seller to make a clean exit from their investment.
Bid enhancement - The question of indemnity caps is a significant issue in M&A transactions. Coverage can provide alternative recourse on a deal, a buyer can accept a lower indemnity cap from a seller, which makes their bid more attractive to the latter.
Cross-border deals - Different indemnification expectations on cross-border deals can lead to widely differing requirements for buyers and sellers. Having a R&W insurance policy provides security for either party.
Limited seller security - Companies located in overseas jurisdictions may not offer a buyer sufficient security for post-indemnification claims. Our policies offers access to stable and high quality capital recourse.
As well as W&I insurance, we can arrange a full suite of transaction liability insurance products, including warranty and indemnity insurance (W&I) and insurance for contingent tax and other liabilities arising in the context of mergers and acquisitions (M&A).
We can also access a simplified range of transaction liability products aimed to speed up the process for private equity firms and businesses pursuing a portfolio of add-on acquisitions for existing or newly acquired platform companies.