Management Consulting

The case study focuses on the implementation of Warranty & Indemnity (W&I) insurance in M&A transactions, particularly for deals exceeding EUR 50 million. Clients often face challenges related to the limitations of traditional purchase agreements, where sellers provide guarantees but limit their liability significantly. This can lead to complications if a buyer needs to claim for breaches of these guarantees, as the seller's financial stability may be uncertain. To address these issues, Aon provided a tailored W&I insurance solution that allows buyers to transfer the risk of guarantee breaches from the seller to a reputable insurer. This approach not only enhances the buyer's protection by extending the coverage and duration of guarantees but also simplifies the transaction process. By limiting the seller's liability to EUR 1, buyers can confidently pursue claims against the insurer, ensuring that they have a financially stable counterparty in case of issues. The quantifiable benefits of this solution include a smoother transaction process, as the W&I insurance facilitates the completion of deals that might otherwise stall due to concerns over seller liabilities. Additionally, sellers benefit from a "clean exit," as they do not need to maintain escrow accounts for potential claims, allowing them to utilize the full sale proceeds for other investments. This strategic use of W&I insurance has proven to be advantageous for both parties involved in M&A transactions, enhancing overall deal security and efficiency.