Jeffrey Woodcox and Adam Adkin authored an article for the December 2018 issue of Oregon Business Lawyer. In their article, the two business attorneys outline representations and warranties insurance and detail how the insurance can play an important role in many mergers and acquisitions transactions.
No seller in an M&A transaction wants to wait for the release of its money from escrow while the buyer takes the business for a spin. And no buyer wants to discover post-closing issues. These competing objectives regarding post-closing risk allocation often create tension in the M&A process. Even with the risk-allocating tools available to lawyers to balance these competing objectives—including materiality and knowledge qualifiers, escrow holdbacks, survival periods, baskets, and caps, to name a few—sellers and buyers can still find themselves unable to reach agreement. For the right deal, representations and warranties insurance (R&W insurance) can bridge the gap.
R&W insurance insures a buyer (or, more rarely, a seller) against losses resulting from a seller’s breach of its representations or warranties in the purchase agreement. R&W insurance can facilitate negotiations and resolve roadblocks that otherwise might have prevented the parties from reaching an agreement.
To read Jeff and Adam's full outline of the benefits (and potential drawbacks) of R&W insurance, click the pdf link below.
