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Warranty & Indemnity (W&I) insurance is an insurance product that has been developed specifically for the mergers and acquisitions (M&A) market. This type of product is sometimes referred to as Representations and Warranty (R&W) product cover, particularly in the US. W&I insurance provides cover for unidentified breaches of warranties or representations in a share or asset sale agreement.
The purpose of W&I insurance is to transfer the risk of any financial loss that may arise from a breach that arises from a share or asset sale agreement from the seller (or some other person or entity providing the warranty or representation) to the insurer or issuer of the W&I policy. If you are considering buying a business there are many things you need to do from a legal, financial and general business perspective. Getting the right advice from the start is important. The structure of and issues involved in the sale are quite different if you are buying the business assets only, compared with the shares in the company that owns the business.
In this article we will highlight some of the key issues to be considered. Making sure you follow the right process before signing any documents is a key component of a successful business purchase. The main things to do before signing a contract are:
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