Jun 2018


Grey Papers

Indemnities or Insurance?


Indemnities or Insurance? Getting and Mitigating M&A Transaction Risk

M&A transactions come with all sorts of risk – for both buyers and sellers. Beyond revealed or seen risk and liabilities are those that are undisclosed, unforeseen or as a result of incident.

Buyers want to ensure that they’re covered for any risk associated with the asset they purchase. Sellers want to get rid of as much liability as possible as they divest the asset. It seems like the two ideas are at odds with each other.

How do buyers and sellers have adequate risk and liability protection and still have the M&A deal work?

In recent years, there has been growth in Representations & Warranties (R&W) insurance as a tool to manage risk and liability alongside traditional indemnities or as a mechanism to shift liability to a third party to speed up and get done M&A transactions.

Pilko & Associates has put together a Grey Paper that explores R&W insurance in M&A transactions. We discuss the differences and relative advantages and disadvantages for both the buyer and seller.

We want to make sure you know when each is appropriate and how to mitigate M&A and post-deal transaction risk and liability. It’s exciting to see how R&W insurance can address issues like:

  • Deal acceleration
  • Deal completion
  • Risk simplification
  • Business value protection
  • Extended coverage times
  • Covering unknown or unforeseen risks
  • Speeding up indemnity collections