Dynamic food M&A market driving demand for warranty & indemnity

Specialist insurance protection can drive a competitive advantage for sellers, while de-risking transactions for buyers, and assist with deal completion

Warranty & Indemnity insurance (W&I) and Tax Insurance are fast becoming a key part of transactional deals, such as mergers and acquisitions, in the increasingly dynamic food and drink sector.

That’s according to food and drink sector insurance specialists at Arthur J. Gallagher - one of the UK’s largest risk management and insurance brokerages.

For the seller, W&I insurance can cover their contractual liability under a specific sale and purchase agreement.

For a buyer, W&I insurance can credit-enhance the transaction by insuring those warranties with the A-rated insurer, whilst also potentially increasing the limit, time period and scope of the warranties and indemnities offered by the seller.

Tax Insurance is focused on the known risks arising from M&A transactions, which are generally of low/medium probability but high severity.

Alan Pratten, Managing Director of Arthur J. Gallagher’s Major Risks team and a specialist in the food and drink sector, said: “These forms of transactional insurance, designed to assist in the execution and delivery of a deal are now common place in the London-based private equity market.

“With merger and acquisition activity in the food and drink sector growing, these tools need to be fully understood as they can drive a competitive advantage for a buyer, and de-risk a transaction for the seller.

“With regard to tax for example, where significant value differences/ranges apply to tax questions, the use of these solutions has assisted with the completion of the transaction.”

To help companies better understand tax insurance, Arthur J. Gallagher has scheduled a new webinar, which takes place on Friday April 15 at 10:15am.