Mergers and Acquisitions is a specialist segment within Honan focusing solely on providing clients with tailored solutions to meet their M&A insurance needs.
Warranties and Indemnities Insurance
Warranty and Indemnity Insurance (W&I) is designed to protect both buyers and sellers from financial loss resulting from an unknown or undisclosed matter, helping to prevent negotiation obstacles that could otherwise get in the way of a Mergers and Acquisitions transaction.
Often, during M&A negotiation, a gap exists between the level of warranties offered by a seller and the level of warranties that a buyer is willing to accept. This can result in a deadlock between parties and their advisors. When a W&I policy is in place, it bridges this gap by transferring certain risks to a third party. W&I policies are widely used by Private Equity, both at investment and exit, and by corporations either when dealing with a financial party or in a private company transaction.
Although not an exhaustive list, W&I insurance is commonly used in the following circumstances:
- Need for a clean exit
- Increase warranty protection where sale agreement warranty cap is too lowbr
- Take a deal breaker or other known matter off the table
- To facilitate deals
- Unlock funds reserved against potential liabilities
- ‘Price’ deal risk
- IPO exit for Private Equity
- Escrow replacement
- Protect a buyer against the long term financial stability of a seller
- Bridge a gap between the parties
- Strategic use as a transaction ‘tool’ to maximise a negotiation position or improve deal outcome
Using our expertise to identify potential areas of exposure, we can help both vendors and purchasers to plan for future contingencies.
Key areas we can review and report on include:
- The structure and financial impact of the cost of insurance
- The key risk areas inadequately protected by insurance or management controls
- Compliance with regulations
- Identification and quantum of potential contingent liabilities
- SPA liability issues
- Recommendations on insurance programme design and considerations post closure
- We have access to markets around the globe through our WBN network and our M&A specialists can provide the risk management and insurance skills and expertise needed to improve the certainty of transaction outcomes.