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M&A Talk (Mergers & Acquisitions), by Morgan & Westfield
Transferring Risk and Achieving a Smooth Exit: The Role of Reps and Warranties Insurance in M&A
Aug 14, 2024
This discussion features Patrick Stroth, an expert in reps and warranties insurance for M&A transactions. He reveals how this insurance has become accessible for small and middle-market businesses. Patrick elaborates on its vital role in facilitating smoother exits by alleviating the burden of escrow accounts and legal disputes for sellers. He delves into the emotional challenges faced by first-time sellers and the financial intricacies of the insurance landscape, emphasizing clear communication during negotiations. Ideal for sellers approaching retirement, this insight ensures a clean exit.
01:23:41
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Quick takeaways
- Reps and warranties insurance transfers financial risks for sellers in M&A, providing a reliable safety net against post-sale claims.
- The due diligence phase is crucial as it demands accurate representations from sellers, intertwining timely scrutiny with potential post-sale liabilities.
Deep dives
Overview of Reps and Warranties Insurance
Reps and warranties insurance plays a crucial role for sellers in mergers and acquisitions, as it transfers the financial risk associated with inaccuracies in disclosures made during the sale. In any purchase agreement, sellers must provide representations and warranties about their business, and if these prove to be false post-sale, buyers can claw back a portion of the purchase price. This insurance helps alleviate this risk by securing coverage against any such claims, therefore providing a safety net for sellers who might otherwise be held financially liable for unforeseen issues that arise after the sale. Given the complexity of these transactions, understanding how this insurance operates becomes essential for effective risk management.
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Discover
highlights
Listen to the best highlights from the podcasts you love and dive into the full episode