Merger or acquisition through a SPAC? W&I-insurance provides peace of mind
Once a SPAC is in a negotiation phase with a target, it is prudent to transfer a number of risks to the insurer. That can be done with a Warranty & Indemnity insurance. Insurance of this kind takes away the concerns of all parties.
In practice, this means that after the due diligence, the board of a SPAC gains a clear understanding of the main certainties and uncertainties associated with a merger/acquisition. Through the W&I insurance, the buyer covers the warranties that the seller provides, plus the associated liabilities. A W&I insurance is a bespoke product, in which Meijers plays an advisory role and discusses the policy conditions with the insurer.
Additional risks
W&I insurance covers many additional risks. From the legal form to intellectual property, IT systems and environmental permits. Should a warranty be breached in practice, resulting in the buyer anticipating a claim, that party can pass this on to its insurer, meaning it does not have to ‘lock horns’ with the seller.
Main benefits?
W&I insurance:
- protects the parties involved.
- accelerates the acquisition process by removing uncertainties. Time is an important factor because a SPAC must complete the acquisition within a pre-determined period of time.
- strengthens the relationship between the buyer and seller, because any liability claims are excluded in advance. This is where the insurer comes in. Having this insurance also helps parties to avoid possible reputational damage, with the consequent negative effects on share prices.
In summary: W&I insurance provides peace of mind. During the precarious process of merger and acquisition, that is very welcome for all parties.