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W&I Insurance

Distressed M&A

What's on this page:

We understand that there isn’t a one-size-fits-all approach to M&A transactions.

Our Team have developed a “synthetic” W&I product. We particularly cater to the specific demands of buyers acquiring distressed targets.

Our Team are experts in providing W&I insurance – bringing together some of the most experienced practitioners in the industry – which means we can move at the pace required for a distressed acquisition. We offer a premium service and so clients will receive thoughtful, considered coverage.

And afterwards our Claims process is capable of dealing with complex matters as efficiently as possible and is supported by robust Risk Capital from major insurers.

For more information about Brockwell and our appetite see About Us and Risk Appetite.

Get a quote here.

What is synthetic W&I insurance?

Previously buyers have taken on the risk of unidentified historic liabilities as part of distressed M&A. However, we can offer ‘synthetic W&I insurance’ whereby Brockwell proposes a set of warranties and undertakes a Q&A process in order to get comfortable with standing behind those contractual protections.

The process is designed to accommodate limited due diligence and restricted seller involvement, whilst providing a buyer with additional comfort.

We want to facilitate your transactions – if you have any specific coverage requests please let us know and we will consider whether we can accommodate these or create a bespoke solution.

How can distressed W&I insurance help me?

Acquiring a distressed business does not allow the time for buyers to get as much comfort as desired. Our distressed W&I insurance helps buyers mitigate unknown risks and so facilitates the acquisition process.

For example, a W&I policy can help in a distressed scenario by:

  • providing a buyer with financial recourse for key warranties
  • facilitating a sale of assets by lenders after enforcement of security
  • assisting with getting a buyer’s leveraged finance provider comfortable
  • protecting a buyer’s financial model against unforeseen liabilities

Identified risks can cause a transaction to stall. It may be possible for us to complete a separate underwriting work stream and get comfortable, in which case we will be able to use our in-house expertise to offer separate protection under a standalone Tax or Contingent policy.

The tax treatment of debt waivers and restructurings can create potential risks that delay a distressed transaction. However, our in-house tax and accounting expertise can be used to explore a separate tax policy in order to get a buyer or lenders comfortable.

We can offer cover either during a transaction or post-acquisition in order to give additional comfort.

What are the key scenarios for distressed W&I insurance?

There are three scenarios where distressed W&I insurance can particularly help:

(1) Institutional Exit

An institutional sponsor and management team may be looking to exit, but their equity is under water and so there is no financial incentive for the sellers to give contractual protection. A W&I policy can be used to give a buyer financial cover.

(2) Insolvency Practitioner

An IP has been appointed and will not provide any contractual protections other than in respect of the validity of their appointment. Using W&I will provide alternative protection.

(3) Finance Parties

A finance party has enforced security and wishes to dispose of the asset, but is unwilling to offer any contractual protections. The finance provider can propose a W&I policy to any buyers seeking contractual protections to facilitate the disposal.

FAQs

Yes. Given the lack of due diligence available, in order to get comfortable Brockwell will request certain documents and information for review. This is more akin to sell-side W&I, except that we may need to make specific document requests where there is no (or a limited) data room.

We will consider any business that falls within our general Risk Appetite. Naturally, a more attractive business to insure will be fundamentally robust but materially adversely affected by circumstances beyond its control.

Aside from the market standard W&I exclusions (see this page), we would not offer cover for any liability arising from matters that would be generally disclosed in a market standard disclosure letter (e.g. information that would be revealed from searches of public registers).

We would also apply market standard seller limitation provisions to the synthetic warranties.

We typically provide a quote for insurance within 48 hours from receipt of the request for terms, but can provide a quote within 24 hours in exceptional circumstances.

This will depend on several variables, like the quality and amount of information readily available combined with the breadth of warranty cover required (more cover requires more review). It is possible for us to issue a finalised policy within five business days.

We understand that speed is key where a business is in distress and we can undertake a limited “light touch” review offering a limited warranty pack with a second underwriting process post-acquisition in order to establish if wider warranty protections can be offered (if required).

Yes. Whilst our key focus is on distressed scenarios, we would (for example) also contemplate offering the same cover for a public-to-private transaction.

Tax insurance provides an indemnity to the policyholder for an identified tax risk. We regularly cover international risks between £1m and £45m, including in the context of debt forgiveness and debt restructuring.

For more information click here.

This insurance provides protection against uncertain legal interpretation. The policy includes an indemnity for an identified risk and can be used in both a contentious and non-contentious context.

For more information click here.

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