transactional insurance overview
TRANSCRIPT
2 | Woodruff-Sawyer & Co.
Ws&Co. and RKH Global M&A Practice
Dedicated offices in North America and Europe.
Access to the M&A insurance hubs in New York and London
18 team members, including Qualified US and UK lawyers, Tax Experts and a wealth of long term Transactional Risk Insurance experience.
Cross boarder transactions have team members from both hubs allowing for genuine 24 hour, glob-al access with seamless international placements
In a Merger & Acquisition (M&A) transaction, the Seller is
typically required to indemnify the Buyer for breaches of the
representations and warranties made in the Purchase & Sale
Agreement. The Seller may be required to fund an escrow to
guarantee money is available in the event of a breach.
Representations & Warranties (R&W) insurance comes in two
forms; either the Buyer or Seller can be the insured. The
premium, coverage and underwriting process is slightly different
depending on which party is purchasing. The policy is triggered
by a breach of warranties post close and the loss is the
diminution of value associated with that breach.
Beyond Reps & Warranties are a number of other specialized
solutions to facilitate deal sticking points, including, but not
limited to, Tax Opinion insurance, Loss Portfolio Transfer and
Investment Fund Closure/Contingent Liability insurance.
Transactional Insurances are geared towards breaches of con-
tract and contingent liabilities. This should not be confused with
D&O Tail Coverage that shields Directors for breaches of
fiduciary duty.
3 - 4% of coverage limits required (e.g. 10M at $300,000 - $400,000)
One-time payment for 6 - year policy
Pricing is dependent on the size of retention / escrow and other
deal factors
www.wsandco.com | 3
Reps and Warranties Insurance
Transaction Overview:
A. Determine optimal
policy structure: buyer
or seller based
B. Rational for transac-
tion
C. “Sale and Purchase
Agreement” or “Deal
Parameters”
Action Items:
A. Due diligence request list
B. Data room index
C. Due diligence reports
D. Fee becomes payable
E. Outside counsel reviews
on behalf of underwriters
and provides report
F. Final Sale/Purchase
Agreement
Action Items:
A. Due diligence
conference call
(underwriter &
counsel, client and
outside counsel,
Insurance broker)
Underwriter action items
Client action items
Other Insurance Products
Tax Opinion Helps reduce or eliminate a contingent tax exposure that is causing a negotiating block
Litigation Buyout Helps put a stop loss on existing and ongoing litigation
Contingent Liability CoverageAssists in protecting against a potential obligation that may be incurred depending on a future
event
Key Markets: AIG, ACE, AWAC, Lloyd’s (Ambridge)
Beazley, Concord, Hiscox, QBE
Coverage: Each contract is individually negotiated
Pricing Parameters: Dependent on the size of Retention/escrow and other deal factors: 3 - 4% of coverage limits required (e.g. 10M at $300,000 - $400,000)
Retention: Customized to the deal
Underwriting Fee: Typically $15K-$25K non-refundable fee due at time of legal review
4 | Woodruff-Sawyer & Co.
Reps and Warranties Insurance
NORTH AMERICA 13%
EUROPE 10%
UNITED KINGDOM 22%
% Of Deals Which Used R&W Insurance
Source: Paragon International Insurance Brokers Ltd
Why the sudden Explosion
Changes in available coverage
Definition of Loss to include multiples of EBITDA and
consequential damages
Zero seller indemnity structures
Changes in Market Money chasing deals – PE/VC
Profitable results – Insurance Market
% Of Deals Which Used R&W Insurance
Changes in Underwriters and process
In house lawyers and CPA’s added to staff
Greater experience leading to reduction in fear
What does that mean?
Zero seller indemnity – how to win at auctions
Multiples of loss and consequential damages
Get the blessing of your deal lawyers
Source: Paragon International Insurance Brokers
Growth of R&W Insurance in Recent Years
www.wsandco.com | 5
Mergers & Acquisitions Insurance Solutions
trade sell
Source: Paragon International Insurance Brokers Ltd
NORTH AMERICA 3-3.5%
EUROPE 1.25-1.75%
UNITED KINGDOM 1-1.5%
Regional Pricing (Rate as % of Policy Limit)
Median Policy Limit Purchased As a % of Deal Value
Regional Pricing (Rate as % of Policy Limit)
Source: Paragon International Insurance Brokers Ltd
Source: Paragon International Insurance Brokers Ltd
Global Distribution of R&W Insurance in Deals ( )
www.wsandco.com |
Timing of Claims
Biography
Emily Maier
Transactional Insurance—Group Leader
949.435.7378 [email protected]
Leading Woodruff-Sawyer & Co.’s Transactional group, Emily provides consultation and support to clients who wish to use the insurance market to limit the risks that arise from Mergers & Acquisitions activity. This includes Representations and Warranties, Tax Opinion Liability and Litigation Buy-Out coverages.
Emily’s deal experience spans both American and European deals. Her clients are as diverse as their locations. She has worked with both Strategic and Private Equity buyers and sellers over a wide range of transaction sizes and industries.
Prior to joining Woodruff-Sawyer in the United States, Emily specialized in M&A insurance transactions in leading brokerage firms in London, including Marsh, Howden and Heath Lambert. Emily is a popular speaker and published author on the topic of Mergers & Acquisitions insurance.