Private Equity Viewpoint: Protecting Your Investment

With the recent uptick in merger and acquisition (M&A) activity, a number of private equity firms have begun to consider a relatively new form of insurance coverage to help facilitate their portfolio companies’ transactions. This coverage — M&A insurance — has become increasingly popular, and this article provides an overview of situations in which M&A insurance should be considered and how such insurance works.

Private equity investors and their portfolio companies should consider M&A insurance in several situations: (1) "capping" indemnification exposure when on the "sell side;" (2) providing additional protection for representations made by the seller when on the "buy side;" and (3) dealing with specific liability concerns.