Representation and Warranty Insurance for M&A Transactions

by Michael S. Darby and Quinn Wetherall, Dechert LLP, with Practical Law Corporate & Securities

This Practice Note on representation and warranty insurance (R&W insurance) in M&A transactions provides a detailed overview of how R&W insurance can facilitate risk allocation between buyers and sellers. R&W insurance offers coverage for losses stemming from unknown breaches of the seller's representations and warranties in acquisition agreements, helping to resolve disputes over indemnity obligations. The document highlights the increasing prevalence of R&W insurance in private M&A transactions. It discusses the advantages, such as streamlined negotiations and expedited sales, alongside disadvantages like increased transaction costs and complex negotiations over policy exclusions. The Practice Note also covers policy terms, exclusions, economic considerations, and the claims process, emphasizing the importance of insurer selection and the underwriting process. This resource serves as a valuable guide for legal professionals navigating the intricacies of R&W Insurance in M&A transactions.