April 12th, 2021

Private Equity, M&A and Tax

How Warranty and Indemnity Insurance unlocks value in M&A transactions

By: Sandra Lee

Every M&A transaction includes elements of risk and uncertainty. M&A players and their advisors are often locked in protracted negotiations on allocation of such risks.

Warranty and Indemnity (W&I) insurance is often used to facilitate such negotiations, offering protection against financial losses arising from discovery of unidentified risks post-completion that result in breaches of representations and warranties.

Warranties are statements made by the seller to the buyer which relate to the historical operations of the target company. Some examples of breaches include financial statement errors, undisclosed tax matters or non-compliance with regulatory matters.

In this article, BMS Group’s Sandra Lee and Aris Wong discuss the what, why and how of W&I insurance and its significant value add to M&A transactions.

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Lee Sandra

Sandra Lee

CEO & Head of PEMAT, Asia

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