M & A experts worldwide are using an insurance policy known as a Representation and Warranty (R & W) to transfer risk from the parties in a transaction to an insurance company.  R & W policies are designed to, "step in the shoes" of a seller to pay indemnification claims by the buyer for inaccuracies of the representations and warranties outlined in the purchase/sale agreement.  Due to the low cost of  R & W insurance, sellers are driving the demand for these policies rather than accept large, lengthy escrow or withhold terms.  Buyers are discovering how R & W insurance can enhance their bid without having to raise their offer.

For the seller: 

1. An R & W policy replaces the indemnification provision and reduces the escrow to 1% or less of the purchase amount.
2. Enables early and final distribution of proceeds to investors.
3. Locks in the return and provides a clean exit as contingent liabilities are covered.
4. Expedites the sale by getting the indemnification issue "off the table".

1. Distinguishes bid in a competitive auction, without raising the offer price.
2. Eases concerns about collecting on seller's indemnification.
3. Preserves relationship with seller.  In the event the seller is remaining with the company, the buyer pursues the R & W insurer, and NOT the seller in the event of a breach.
4. Expedites the sale by getting the indemnification issue "off the table".