Representations & Warranty Insurance

Representations & Warranty (R&W) policies are used as a strategic risk transfer tool to give protection to either the buyer or seller against financial losses suffered as a result of an unexpected breach of warranty or claim under a tax indemnity. Tailored protection is provided by the insurance market to the insured for unknown issues such as financial statement errors or undisclosed regulatory matters.

R&W insurance can be purchased by either a buyer or a seller however the buy-side policy is largely used to afford the seller a clean exit and provide the buyer a direct means of recourse as an alternative to pursuing the existing warrantors in the event of a claim. Buy-side policies are often initiated by a seller (or management team, private equity firm, infrastructure fund, bank, real estate firm or corporate) as part of an auction process and the policy is then ‘stapled’ to the transaction.

Process

The BMS Private Equity, Mergers & Acquisitions and Tax team will work with you to ensure that the R&W process works as efficiently as possible in tandem with the M&A transaction timeline. The policy is designed to support rather than replace the underlying transaction and insurers will require a robust due diligence and disclosure process to be carried out.

    Premium

    The premium is calculated as a rate-on-line of the policy limit being purchased. There are various factors which will affect this rate such as the nature and jurisdiction of the target business being bought, the governing law of the transaction, the scope of the warranties and whether any specific enhancements to the policy are required. These variables will be discussed at the outset of the transaction and the one-off premium will be payable once completion of the transaction has occurred.

    The benefits of using R&W

    Buyer Benefits

    • Mitigates risk of seller covenant strength
    • Certainty when investing in a new asset class / geography
    • Protects ongoing business relationships with management
    • Extends out insufficient SPA limitation periods
    • Bid differentiation in competitive auction process
    • Satisfy corporate governance requirements
    • Proceeds of claims can be assigned to a lender

    Seller Benefits

    • Clean exit / nil recourse
    • Immediately realise sales proceeds
    • Balance sheet protection post completion
    • Prevent price chips or hold-backs


    Mutual Benefits

    • Removes significant obstacles
    • Mitigates difficult negotiations
    • Bridges gaps on uncertain exposures
    • Affirmative cover for certain known risks
    • Synthetic packages may be utilised

    Exclusions

    R&W insurance policies will usually exclude matters that are known to the insured including matters disclosed by the seller or within the buyer’s actual knowledge. Forward looking statements, certain fines and penalties, pension underfunding and post completion purchase price adjustments are often excluded. There may also be deal specific exclusions depending on the underlying transaction i.e. target industry, jurisdiction or a specific risk that has been identified in the due diligence process.

    Pawar Tan

    Tan Pawar

    Head of Private Equity and M&A

    T: +44 (0)20 7480 0264
    M: +44 (0)7341 133 007
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    Andrews Dean

    Dean Andrews

    Executive Director, Head of Tax and Contingent Liability Insurance

    T: +44 (0)20 7480 0308
    M: +44 (0)7876 815 643
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    Wallace Sophie

    Sophie Wallace

    Director

    T: +44 (0)20 7480 0378
    M: +44 (0)7824 605 613
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    Matthew Gillam

    Director

    T: +44 (0)7353 097 262
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    Kemp Simon

    Simon Kemp

    Group General Counsel

    T: +44 (0)20-7480-7288
    M: +44 (0)7825-844-988
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    Matthew Grice

    Divisional Director

    M: +44 (0)7776 568 847
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    William Banks

    Associate Director, Secondaries

    M: +44 (0)7353 097 250
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    Rian Bahia

    Associate Director

    M: +44 (0)7823 672 455
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    Kanwar Chandini

    Chandini Kanwar

    Associate Director

    T: +44 (0)20 7374 5990
    M: +44 (0)7825 421 394
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    Marcus Christie

    Associate Director

    T: +44 (0)20 7374 5937
    M: +44 (0)7826 532 908
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    UK

    One America Square
    London EC3N 2LS
    United Kingdom

    T: +44 (0)20 7480 7288

    FREILICH eric

    Eric Freilich

    Director, Legal Counsel, Private Equity and M&A

    M: +1 647 533 9699
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    Allen logan

    Logan Allen

    Director, Private Equity and M&A

    M: +1 416-722-8171
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    Toronto

    161 Bay Street, Suite 4140,
    Toronto, ON M5J 2S1

    Lee Sandra

    Sandra Lee

    CEO & Head of PEMAT, Asia

    T: +852 3579 5485
    M: +852 9255 7088
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    De Lange Martijn

    Martijn de Lange

    Managing Director - PEMAT

    T: +852 3579 5486
    M: +852 9772 9951
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    Jayasundara Nelumi

    Nelumi Jayasundara

    Senior Associate - PEMAT

    M: +852 9801 3916
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    Hong Kong

    20/F Leighton Centre
    77 Leighton Road
    Causeway Bay
    Hong Kong

    Godden Andrew

    Andrew Godden

    Chief Executive Officer - Australia

    M: +61 (0) 432-805-729
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    Sydney

    Level 3,
    222 Clarence Street,
    Sydney NSW 2000

    T: +61 (2) 9165 3511

    Ong Rae

    Rae Ong

    Business Development Lead - PEMAT

    M: +65 9783 5566
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    Ryan Heng

    Director - PEMAT

    M: +65 8792 6334
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    Soh Ryan 1200x1200

    Ryan Soh

    Associate - PEMAT

    T: +65 9792 5282
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    Singapore

    61 Robinson Road,
    #09-05,
    Singapore 068893

    T: +65 6018 0537

    Claro Fernando

    Fernando Claro

    Chief Executive Officer, Iberia

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    Schmitz Kai

    Kai Schmitz

    Head of Tax Insurance – Iberia

    M: +34 672 334 459
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    Ricardo Lecaro

    Ricardo Lecaro Manrique

    Head of M&A Insurance – Iberia

    M: +34 677 741 647
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    Madrid

    Paseo de la Castellana 28, entreplanta
    28046 Madrid

    T: +34 91 419 76 40

    Yongtak Lee

    Yongtak Lee

    CEO & Managing Director

    T: +82 2 6405 1021
    M: +82 10 3110 2807
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    Cha Chloe

    Chloe Cha

    Associate Director

    T: +82 2 6405 1021
    M: +82 10 7164 7071
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    Seoul

    S-Tower Kwanghwamun Co-Workers,
    Sinmun-ro 1-ga, #1818 18F,
    82 Saemunan-ro, Jongno-gu,
    Seoul 03185

    T: +82 2-723-1800

    Schmitz Kai

    Kai Schmitz

    Head of Tax Insurance – Iberia

    M: +34 672 334 459
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    Ricardo Lecaro

    Ricardo Lecaro Manrique

    Head of M&A Insurance – Iberia

    M: +34 677 741 647
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    Miami (US)

    800 Brickell Avenue
    Suite 350, Miami, Florida 33131

    T: +1 786-581-1896

    Hewitt Tim

    Tim Hewitt

    Head of BMS Japan/ Managing Director

    M: +81 70 9127 2075
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    Tokyo

    Pacific Century Place 13F,
    1-11-1 Marunouchi,
    Chiyoda-ku,
    Tokyo