The Financial Post recently published an article highlighting legal innovations from the US that may see an upsurge of use in the Canadian landscape in 2015, including representation and warranties insurance (R&W insurance).
South of the border, Law360 reported that the use of R&W insurance "exploded, with the market for the liability policy growing roughly fourfold [in 2014]." Although R&W insurance has existed since the 1990s, it was the first time that insurers "struggled to keep up with... record demand."
R&W insurance provides protection to both buyers and sellers involved in mergers and acquisitions transactions (M&A transactions). Amongst the benefits of R&W insurance, for buyers, R&W insurance can play a key factor in the negotiation process by enhancing and distinguishing bids as against those of their competitors. Seller-side coverage can result in value creation whereby sellers take comfort in providing enhanced representations, warranties and indemnities with the knowledge that some of the risk has shifted to the insurer.
In Canada, the Financial Post noted that the use of R&W insurance may "pick up steam" particularly in the context of private equity firms that are selling off businesses. The appeal to private equity fund managers comes from the fact that they are interested in sales with a "nice return and a clean exit" and as a "customized product designed to indemnify a seller from unexpected surprises", R&W can act as a gateway to closing for buyers and sellers in M&A transactions.
For further reading on the use and benefits of R&W insurance, refer to our previous post.
Stay informed on M&A developments and subscribe to our blog today.
Norton Rose Fulbright Canada LLP
Norton Rose Fulbright is a global legal practice. We provide the world's pre-eminent corporations and financial institutions with a full business law service. We have more than 3800 lawyers based in over 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia.
Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.
Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offices and to maintain that level of quality at every point of contact.
Norton Rose Fulbright LLP, Norton Rose Fulbright Australia, Norton Rose Fulbright Canada LLP, Norton Rose Fulbright South Africa (incorporated as Deneys Reitz Inc) and Fulbright & Jaworski LLP, each of which is a separate legal entity, are members ('the Norton Rose Fulbright members') of Norton Rose Fulbright Verein, a Swiss Verein. Norton Rose Fulbright Verein helps coordinate the activities of the Norton Rose Fulbright members but does not itself provide legal services to clients.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
