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Representation and warranties (R&W) insurance is usually discussed during the earliest stages of negotiation of private target deals. R&W insurance has the effect of shifting the risk of claims arising from breaches of seller reps and warranties from the seller to the insurance policy. This reallocation of risk affords the buyer an opportunity for broader seller reps and less time negotiating reps and warranties.
The prevalence of R&W insurance referenced in private target transactions valued at $25 million or more in 2022 decreased as compared to 2021 and 2020. Based on a Market Standards survey of 343 private target deals announced in 2022, 27% of those deals referenced R&W Insurance as compared to 35% of similar deals surveyed in 2021 and 34% in 2020. The number of transactions for which R&W insurance policies are obtained is likely underrepresented as many transactions capture the terms of such policies outside of the acquisition agreement and the policy is secured early in the deal process.
Market Standards is a powerful tool for researching and comparing over 38,000 M&A transactions from 2008 to the present. Leverage Market Standards to find on-point precedent language on the most highly negotiated transactions with over 150+ M&A deal points. To learn more about how it can help M&A attorneys work more efficiently, click here.
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