Has Rep & Warranty insurance been an effective tool in your deals?

professional profile

April 08, 2021

by a professional from Millikin University in Chicago, IL, USA

Private equity buyers began using R&W insurance as an ordinary course deal product several years ago as a mechanism to present a more competitive offer to Sellers. Sellers favored the use of R&W insurance because it replaced the escrow mechanism, thus releasing purchase price proceeds. Strategic acquirers are now competing with more private equity buyers than ever before and have had to adopt the R&W product in order to win deals. R&W insurance has become so common that sellers are inserting it into first drafts of term sheets.

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Reply by a searcher
from Georgia Institute of Technology in Kansas City, MO, USA
It is becoming more common for us too. The last deal we closed had a policy in place, and what is on track to be our next deal will have one in place as well. I honestly cannot remember the split on the last deal but on this upcoming deal, we are splitting both the premium as well as the diligence fee 50/50 with the seller.
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Reply by a professional
from Millikin University in Chicago, IL, USA
Our practice created a Spring 2021 R&W insurance market update. It covers pricing, retentions, pre-exclusivity underwriting, and whether or not SPACs are using RWI.

If you would like a copy, email me at redacted I would be happy to share it.
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