Mergers & Acquisitions Insurance/Due Diligence
Mergers and acquisitions can be fraught with risk but one way to minimise this risk is through due diligence insurance. Due diligence insurance protects from the transaction should anything go wrong and cause losses to your business. Popular policy options for due diligence insurance include transaction liability insurance, warranty and indemnity insurance, tax liability insurance and environmental liability insurance.
Transaction liability insurance reduces the potential risk of a transaction through transferring the risk to the insurance market, rather than leaving the burden on your business. Should the transaction prove unsuccessful, funds can be returned to investors and a clean exit from the acquisition is available. Warranty and indemnity insurance protects your business from financial loss for any inaccuracies in warranties and indemnities from the company to be acquired. Tax liability insurance legally and financially protects your business should any contentions regarding taxation arise; these contentions can be costly and disrupt the business cycle without coverage. Environmental liability insurance covers the financial costs of reducing pollution conditions, on-site and off-site clean ups or even legal representations that may be needed due to the unknown practices of the acquired company.
Without due diligence insurance, mergers and acquisitions can be high-risk transactions, with some businesses not fully disclosing all aspects of their practices. This could cost your business both financially and legally, however, the risk can be minimised with a comprehensive insurance plan.
Warranty & Indemnity Insurance
Mergers and acquisitions can be an exciting but stressful time for many businesses due to the various unknown elements of the transaction. One of the most effective methods of protecting your business from these inevitable and costly risks is mergers and acquisitions insurance. One of the most important and crucial covers includes warranty and indemnity insurance, which is also known as representation and warranties insurance.
Through the investment of warranties and indemnity insurance, the risk of the merger or acquisition is transferred to the insurance market, which allows an easy and clean exit should the transaction become problematic for any reason, making the negotiation process much quicker.
Warranty and indemnity insurance protects your business from any financial losses that may occur as a result of warranty or indemnity inaccuracies from the acquired company. This particular policy benefits from the seller and buyer of the transaction as it can be claimed directly under the policy without the seller and covers any legal representation that the seller may require as a result of the inaccuracy.
Whether you are the seller or the buyer of a merger/acquisition, there are always risks involved so consider protecting your business from through warranty and indemnity insurance to avoid legal or financial losses.