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Transactional Risk



The purpose of transactional risk insurance products is to facilitate sale transactions by protecting deal participants from risks that arise in due diligence or during negotiations that could inhibit a transaction from closing.  


Market Segments We Serve:

  • Corporate Mergers & Acquisitions 
  • Private Equity
  • Project Risk Advisory 

 Coverages
:
  • Representations and Warranties 
  • Tax Liability
  • Contingent Liability
  • Due Diligence Consulting

Industry Solutions

Representations and Warranties Insurance
Representations and warranties insurance is designed to fill the gaps that result between the buyer and seller during their negotiations related to escrow amounts, indemnification caps, and/or survival periods of the representations and warranties. It covers the financial loss, including defense costs, which arise from breaches of representations and warranties made by a target company in the purchase agreement. The R&W insurance typically covers all representations and warranties contained in the purchase agreement, but policies are completely tailored and negotiated on a deal-specific basis with very few exclusions from the insurance carrier. The common exclusions found in these policies are criminal fines/penalties, knowledge of breaches/fraud by the insured’s deal team, and post-closing purchase price adjustments.  In a transaction, policies can be obtained for either the buyer or the seller depending on what the parties want to accomplish.

Incentives for Buy-Side:
  • Provides additional protection beyond the negotiated indemnity cap and survival limitations in a purchase agreement
  • Protects against collectability/solvency risk of an unsecured indemnity (e.g. financially distressed, non-U.S., or multiple sellers)
  • Allows buyer to distinguish a bid in an auction (e.g. requiring only minimal or no survival of reps and warranties in a bidder’s draft purchase agreement)
  • Preserves key relationships (e.g. avoids buyer having to pursue claims against management sellers working for buyer
  • Affords alternative recourse to shareholders in public to private transactions

    Incentives for Sell-Side:
  • Backstops negotiated indemnity obligation (key for private equity or venture capital funds at the end of their life cycle)
  • Protects minority/passive sellers concerned with joint and several liability
  • Provides additional comfort for individual or family sellers
  • Furnishes a solution for situations where there is a lack of ownership history (e.g. restructurings, “loan to own”)
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