Insuring M&A tax risk

One of the most striking recent trends in private M&A is the increasing use of warranty and indemnity (W&I) insurance.  Many of the terms of an insurance policy are negotiable and this article outlines some of the provisions that advisers may wish to focus on. Although useful, insurance raises a number of practical and technical issues and may weaken the overall level of protection obtained by the buyer. The role of the tax covenant needs to be re-evaluated, and it becomes more important to ensure that identified issues are factored into the purchase price.