Current Trends In Representation And Warranty Insurance

In any business acquisition, the lure of great profit is accompanied by the specter of risk. For mergers and acquisitions practitioners, the allocation of unknown business risk between the buyer and the seller is generally one of the most contentious aspects of a deal negotiation. Although both sides place great value on the cash flows from the target business, neither party wants to be responsible for hidden compliance violations, unpaid back taxes or valuation missteps caused by financial statement errors. Historically, the parties that were willing to hold transaction risk were limited to those with a direct interest in the deal: the buyer and the seller. In the past decade, however, a segment of the insurance industry has started shouldering a piece of the risk in M&A deals for a price.