Articles Tagged with M&A

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The news has been rife of late with announcements of intended mergers, including Amazon and Whole Foods, Sprint and Comcast, and the National Enquirer and Time Inc., to name a few. Although iStock-480052842-RandW-300x200such deals are nothing new, the use of representations and warranties insurance (R&W insurance) is increasingly becoming a key component in the decision-making process for buyers and sellers alike. R&W insurance provides coverage for breach of representations or warranties contained in deal documents in addition to, or as a replacement for, indemnity provisions. R&W policies allow buyers and sellers to shift enough of the risk to third-party insurers to provide the certainty necessary to close the deal.

In a typical transaction, the seller agrees to indemnify the buyer for losses resulting from breaches of reps and warranties, usually subject to a cap. The seller will often commit to placing an agreed upon amount in escrow to secure its indemnification obligation. However, tying up funds in escrow can sometimes present a significant obstacle to closing the deal.

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