YEAR 2024 No 3 Volume 35

ISSN 2182-9845

The W&I Insurance as a facilitating tool in the negotiation process for the acquisition of a controlling shareholding

Filipe Manuel Farréu Rama dos Santos Barata

Keywords

W&I Insurance; M&A transactions; negotiation process; transactional risk; due diligence; representations and warranties.

Abstract

Corporate acquisitions, known in national and international legal jargon as M&A transactions, are based on a demanding, challenging and complex negotiation process, dynamic and phased over time, characterised by its uncertainty. The pre-contractual phase is characterised by an information asymmetry between Buyer and Seller. This informational inequality leads the negotiating parties to take ab initio particular precautions in order to protect their respective interests, setting up mechanisms and designing solutions to safeguard against future pathological scenarios, allowing for the allocation of negotiating risks and providing the negotiating process with legal certainty and security, thereby promoting its predictability and transparency. We propose in this study to analyse the specific features of the W&I Insurance as a tool for mitigating transactional risk and to identify its impact on the negotiation process of company’s acquisitions.

Table of contents

1. The W&I Insurance and M&A transactions
1.1 Introduction
1.2. The W&I Insurance and the transactional risk
2. Due diligence on the target company
3. The representations and warranties
4. The W&I Insurance
4.1 Framework
4.2. The Insurer's audit
4.3. The (parallel) process of negotiation with the Insurer - the interface between the SPA and the W&I Insurance
5. Conclusions
Bibliography

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