Modern M&A Insurance

The use of insurance capital to help bridge gaps between buyer and seller, or enhance a bid in a competitive environment, has increased in popularity in today's M&A environ­ment.

 

Transactional Risk Insurance

a Valuable Deal Solution


Warranties & Representation Insurance is a fast-growing mainstream solution to maximize your protection and minimize your risk in M&A transactions.


Maximize Your Protection and Minimize Your Risk with Vcheck

  • Leading technology to provide faster turn around so your M&A deals are not delayed
  • Nationwide and International Partners to support multi-region deals with ease
  • Over 5,000 engagements for private equity firms and corporate acquisitive clients

Overview of Representations & Warranties Insurance

Protects against unanticipated seller’s breaches of representations and warranties and losses that may arise post-close.
Cover provided for all fundamental and non-fundamental Representations and Warranties.

Reduces or eliminates seller indemnity or escrow.
May be secured by a buyer or seller (“Buy Side” vs. “Sell Side”)
Can potentially provide additional protection over specified indemnities

Uses

Representations & warranties policies have been proven to be an affordable and smart solution to provide security in a deal as carriers have been willing to pay out on claims brought against the policy.

The use of insurance capital to help bridge gaps between buyer and seller, or enhance a bid in a competitive environment, has increased in popularity in today’s M&A environment. Representations & warranties insurance, in particular, has become a mainstream solution to overcome deal obstacles and increase protection for the buyer, seller, or both parties.

Vcheck offers industry specific solutions tailored to address your specific underwriting concerns.

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Industry specific underwriting concerns

Uses of Rep and Warranties Insurance

Buyers

Risk Management Uses

  • Increase maximum indemnity / extend survival period for breaches of reps & warranties
  • Ease collection concerns
  • Provide recourse when no seller indemnity possible (public company sales, bankruptcy)

Strategic Uses

  • Distinguish bid in auction
  • Protect key relationships

Sellers

Risk Management Uses

  • Reduce contingent liabilities
  • Distribute sale proceeds Protect passive sellers

Strategic Uses

  • Attract best offers by maximizing indemnification
  • Include R&W Insurance as the sole remedy in draft agreements in auctions

Policy Structure

A representations & warranties policy can be purchased by either buyer or seller, to the benefit of, and without detriment to either party. This decision is made based upon the parties involved in the transaction and their specific needs. Frequently, a buyer may make the decision to purchase coverage for the seller, or vice versa.


Buy-Side

Buy-side policies are first party contracts, meaning that claims can be made directly against the insurance policy related to a covered breach of representation. Sellers should note that, as with a sell-side form, a full waiver of subrogation is provided by the insurer, which eliminates the insurance carrier’s ability to subrogate against the seller for a breach of representation or warranty, with the exception of matters involving fraudulent acts.

Sell-Side

Sell-side policy forms are structured as indemnity forms. The insured must make the payment first and then seek reimbursement from the insurance carrier. Coverage can be structured on a blanket basis or for specific representations. Claims based on fraud are excluded on all sell-side policies.

Underwriting

Step1 – Non Bindable Indication Letter (NBIL)


  • Data Required

    Draft transaction agreement, financials, summary of target

  • NBIL

    Premium, Limit, Term, Deductible/Retention, and identified area of concerns

    Step 2 – Underwriting/Audit of Due Diligence


    • Documents

      Review of buy side due diligence reports, data room, memos

    • All Hands On Call

      Review identified due diligence matters and underwriter questions

    • Follow Up Questions/Requests

      Negotiation of policy form to ensure policy mirrors terms of agreement


    Vcheck Risk M&A Professionals Are Here to Help


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