Warranty And Indemnity Insurance In Nigerian Mergers And Acquisitions – Navigating Complexity, Re-Allocating Risk, And Unlocking Value At Exit

Overview

Mergers and Acquisitions (M&A) transactions in Nigeria - much like in other jurisdictions - involve complex negotiations and significant financial stakes. At the heart of these transactions are representations and warranties made by sellers and target entities, which serve to allocate risk and define liability frameworks. Traditionally, these risks have been managed through contractual indemnities, holdbacks, escrow arrangements, or sponsor guarantees. However, an increasingly recognised alternative is Warranty and Indemnity (W&I) Insurance, which insures parties against losses arising from breaches of warranties or indemnities in transaction agreements.

Globally, W&I insurance has become a standard feature in private equity exits and competitive M&A auction processes. According to AVCA¹, adoption across Africa is growing, particularly in South Africa and Kenya. South Africa leads the continent, with W&I insurance routinely used in mid- to large-cap