Fostering use of W&I insurance in French M&A Transactions

With a view to reconcile buyers’ and sellers’ opposite objectives in M&A and private equity transactions, W&I (Warranty and Indemnity, also know as Representations and Warranties) insurance has become a more and more widely-spread tool on the French market to popular risk allocation.

W&I insurance enables to materially bridge gaps by providing comfort to both sellers, who are not necessarily willing to provide large representations and warranties (especially private equity firms who require “clean exits” to receive full purchase price with no counter-guarantee), and buyers, who benefits from a better protection in the event of a breach (reducing solvency issues from sellers for instance).

Appetite for W&I insurance which was initially limited to large cap competitive auction processes, has significantly developed regardless of the size of deals (even if a proper buyer due diligence still remains a key factor) or the business sector. Usefulness of W&I insurance has also been demonstrated in transactions where the parties will remain shareholders or business partners, enabling to preserve the commercial relationship.

We generally advise to anticipate and consider having recourse to W&I (whether on buy-side and/or sell-side being known that the former is more common) as early as possible, but have also assisted our clients as part of the implementation of policies with brokers within very limited timeframes.

The development of W&I insurance in France is likely to have a positive impact on foreign investments.

Pierre GOUGÉ, See all news

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Fostering use of W&I insurance in French M&A Transactions