For PE-backed deals, specifically, competition for assets continues, as Mergermarket notes: ‘[The H1 2018 M&A figures for PE-backed transactions] indicate that PE firms are willing to get involved in the current seller’s market even if valuations do not favour them, due in part to large amounts of available capital and perhaps a push to deploy it before interest rates rise’ (source: H1 2018 Monthly M&A Insider, mergermarket, 24 July 2018).
Notwithstanding an expected gradual tightening in the interest rate environment, this buoyant deal climate and competition for assets has stimulated the need for creativity in M&A and explains how transaction liability solutions – particularly, warranty and indemnity (W&I) insurance and tax insurance (together, M&A insurance) – are being developed with increasing frequency and sophistication as corporates, PE and other financial investors vie with each other to secure their investments on the buyside and enhance their returns on exit.
M&A insurance – quick recap
M&A insurance was originally adopted by the PE industry in the 1990s as dealmakers sought ways to manage deal risk and improve execution. It offers a viable alternative…
