Remove Insurance Remove Middle Market Remove Negotiation
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Setting Yourself Up for Success: Essential Steps, Tips, and Strategies for a Profitable Exit

How2Exit

E248: Setting Yourself Up for Success: Essential Steps, Tips, and Strategies for a Profitable Exit - Watch Here About the Guest(s): Kip Wallen is a seasoned M&A attorney with over a decade of experience in live mergers and acquisitions deals, primarily within the lower middle market, involving transactions up to $50 million.

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Representations & Warranty Insurance

What's Market

The most recent three of these studies (2017, 2019 and 2021) have looked at representation and warranty insurance (“RWI”) in private company M&A transactions. With RWI, buyers and sellers are able to allocate some of the post-closing M&A indemnity risk to third party insurers.

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Representation & Warranty (R&W) Insurance – Current Market Trends

Cooley M&A

Over the last decade the use of R&W insurance in merger and acquisition transactions has grown exponentially. From 2008 to 2018, the total R&W policies bound per year in North America rose from 40 deals, providing $541 million of coverage to 1500+ R&W insurance transactions, providing aggregate coverage of $38.6 Advantages.

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Indemnity Escrows

What's Market

The 2017, 2019, and 2021 ABA studies each show that indemnity caps and indemnity baskets were lower in reported deals where representations and warranty insurance (RWI) was referenced in the deal documents, as compared with transactions without any such reference.

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Indemnity Baskets

What's Market

This article examines how buyers and sellers are negotiating indemnity baskets in private company M&A transactions, as shown in the American Bar Association's private target deal points studies. With RWI, buyers and sellers are able to allocate some of the post-closing M&A indemnity risk to third party insurers.

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Use of Knowledge Qualifiers for Representations and Warranties

What's Market

The scope and detail of these representations and warranties are often heavily negotiated and tailored to reflect both the nature of the target and its business, financial condition and operations, but also the relative negotiating strength of the buyer and seller.

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Disclosure Schedule Updating

What's Market

Buyers and rep and warranty insurers are focusing more aspects of their due diligence on virus-related matters. Transaction parties negotiated expanded or new representations to address the effect of Covid-19 on the target business, as well as the policies and protocols for dealing with those effects.

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