Thinking About M&A? Why You Should Care About Representation & Warranties Insurance
posted on October 26, 2016

 

Representations and warranties (“R&W”) insurance is a product that both sellers and buyers can employ to help protect their interests, increase the likelihood of execution through a simplified negotiation process, and maximize cash at the closing of an M&A transaction.

 

Holding back a portion of sale proceeds is often a common feature of M&A transactions, providing a buyer with added security in the event of a claim against a seller. Many sellers, especially private equity financial sponsors, strongly prefer to receive all sale proceeds in cash at closing and have used R&W insurance to replace the holdback in transactions.

 

This form of insurance is finding its way into the nonprofit healthcare transaction market and allows sellers to maximize value and buyers to make their bids more attractive by ensuring that sellers retain a larger share of net proceeds.

 

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