M&A experts worldwide are using an insurance policy known as a Representation and Warranty (R&W) to transfer risk from the parties in a transaction to an insurance company. R&W policies are designed to, “step in the shoes” of a seller to pay indemnification claims made by the buyer for inaccuracies of the representations and warranties outlined in the purchase/sale agreement. Due to the low cost of R&W insurance, sellers are driving the demand for these policies rather than accept large, lengthy escrow or withhold terms. Buyers are discovering how R&W insurance can enhance their bid without having to raise their offer.
Limit Capacity – Up to $100M on a single policy. Excess capacity up to an additional $400M available as needed.
Retentions – commonly 1% to 3% of the purchase price. Reduces over time
Premium – 3% to 4.5% of the limits purchased (including taxes and fees). Minimum premium is $300,000
Underwriting Fee – From $25,000 to $35,000 in addition to the premium. Covers the cost of Insurer’s attorney’s fees and due diligence costs to review and manuscript a policy. Non-refundable.
Terms – designed to match the survival period. Post survival extensions available upon request.
When looking ahead at 2023, it’s clear there are economic headwinds out there impacting deal-making, including inflation and the threat of recession.
Big tech companies are entering a period of austerity, with giants like Google and Microsoft laying off tens of thousands of employees recently. They over-hired during the pandemic, and they are now having layoffs.
But I’d make the case that lower middle market M&A, especially with regards to tech, media, and telecommunications firms and business services companies, will see no slowdown in deals… In fact, there could very well be an increase in transactions in the coming year.
When your small business owner client is in a room full of MBAs, they can feel out of their depths…
So how do you keep your client’s emotions in check during a high-stakes sale?
Alan Clark is here to share his perspective as a sell-side advisor helping clients exit their businesses.
Alan also reveals why he thinks a common 2023 M&A prediction is wrong—and weighs in on a new sell-side reps & warranties product.
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In M&A, having a set of core principles to guide your thinking is essential…
Ken Heuer of Kidd & Company is here to share the firm’s 3 core principles and how they make business decisions simple.
We also discuss
● What Kidd & Company brings to the table for the lower middle market
● The emergence of a new reps & warranties product to protect sellers
● And more
Mentioned in this episode: ● http://kiddcompany.com ● email@example.com ● https://www.linkedin.com/in/kenneth-heuer-6b16b3/
Step 1: There’s no insurance application. If needed, Rubicon will sign any NDA required by either party. We then required the following documents:
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