Manage the risk inherent to any transaction with reliable, comprehensive support.
We provide specialized expertise and tailored solutions that understand the unique complexity and uncertainty of each transaction.
- Representations and warranties (R&W) insurance covers breaches of the representations given by the sellers and target company in an acquisition agreement, supplementing (or altogether replacing) a typical seller indemnity.
- Tax liability insurance covers losses (additional taxes, penalties, interest, legal defense) resulting from an insured transaction failing to qualify for its intended tax treatment.
- Contingent liability and distressed deal insurance covers non-tax liabilities of a target company disclosed or identified in due diligence that present obstacles to transaction pricing and completion.
Insuring Risk in M&A Transactions
NFP’s Transaction Advisory Practice brings decades of experience in advising private equity clients and other acquirers on the structuring and placement of policies that insure M&A risks. Our team, led by an industry veteran with over 20 years of experience underwriting and broking transaction liability products, includes former M&A and tax attorneys and an experienced private equity professional. We advise on deals ranging in value from $10M to $10B+ and across all industry verticals. We work with all major insurance markets to tailor the best possible protection for your deal and your needs efficiently and without disruption to the M&A process.
Representations and Warranties Insurance
R&W insurance protects M&A buyers from unknown risks arising from the pre-closing operations and ownership of the target company. Buyers use R&W insurance to gain a strategic advantage in auction processes while eliminating seller credit and payment risk and extending coverage term for breaches. When a buyer agrees to use R&W insurance, the sellers typically receive more deal consideration at closing and have a cleaner exit without long-term obligations. Further, both sides benefit from easier contract negotiations and increased deal certainty, while aligning buyer’s and sellers’ interests in the event of a claim.
Tax Liability Insurance
Tax insurance provides certainty to buyers and sellers against IRS (or other tax authority) challenges of specific tax positions reported by the insured. Policies typically cover additional taxes, interest, penalties and a tax gross-up for a term of seven years. In the context of an M&A deal, we can typically insure potential liabilities for historic target taxes that are identified by buyer in due diligence or the tax treatment of the acquisition transaction itself. Tax insurance can also be used outside of an M&A context to insulate a Company from tax uncertainty.
Contingent Liability Insurance
When a known risk becomes an obstacle to completing an M&A deal, contingent liability insurance can eliminate purchase price disparities or cap litigation exposures at the target company. Damages are often uncertain at the time of a transaction and can unnecessarily complicate deal negotiations. These policies are tailored to your specific risk to provide certainty for the buyer without the need for excessive seller escrows or open-ended indemnification obligations.