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Even in times of relative stability, risk is part and parcel of every M&A transaction. Understandably, the level of risk has been amplified over the past two years due to the coronavirus (COVID-19) pandemic. The crisis has caused considerable upheaval in the global economy, with a knock-on effect for dealmaking – initially supressing M&A activity, but later leading to a significant spike.

Independent of the crisis, the transactional risk insurance market has increased in size and sophistication in recent years. Coverage is now available for transactions that would not have been insurable in the past. The market has expanded from exclusively middle-market transactions to cover multibillion dollar deals. In addition to the growth of coverage available, today acquirers and their advisers are much more adept users of transaction insurance products.

Representations and warranties (R&W) and warranties and indemnities (W&I) insurance have become integral elements of M&A deals, playing a fundamental role in transferring risk and getting deals done. These policies benefit buyers and sellers alike. The seller has increased capital liquidity and can walk away from the deal leaving behind a minimal escrow account, while the buyer has a reliable partner on post-closing disputes and can file a claim on the policy, as it would any other insurance.

Going forward, buyers and sellers should ensure they have the right legal, financial and insurance advisers, which includes choosing the right insurer and the right broker, to secure the best possible insurance products for their particular deal.

Against this backdrop, Financier Worldwide turns to some of the leading lights in their field, who share their stories…

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