Representations and Warranties Insurance
Representations and Warranties Insurance can be constructed for either the Buyer or the Seller involved in an M&A Transaction. R&W coverage protects the insured parties from breaches of the representations and warranties in the Purchase Agreement that are unknown at the time the Transaction is consummated. The coverage may benefit both the Buyer and the Seller in helping to overcome obstacles to negotiating the Transaction.
Potential Benefits for Bidders and Acquirers:
- Enhances your bid by enabling reduction of the Seller’s indemnity escrow
- Extends the survival period of the Seller’s representations
- Avoids potential future conflicts with management who are retained in the acquired business, but who were also Sellers
- In most cases, provides a more attractive credit profile than the Seller’s indemnity obligations
Potential Benefits for Sellers:
- Enables reduction of the indemnity escrow, thereby increasing cash available to the Seller immediately upon the sale of the business
- Enables more attractive limitations on the Seller’s indemnity obligations