Transactional Risk Insurance for Mergers and Acquisitions

Canadian companies and investors involved in mergers and acquisitions (M&A), business acquisitions, or the purchase or sale of corporate assets or shares face significant financial exposure arising from potential breaches of representations and warranties in purchase agreements. These M&A risks may affect either the buyer or the seller and can create substantial material liabilities, legal disputes, and financial losses that impact the success of the transaction and post-closing integration.

Transactional Risk Insurance—commonly known as Representations and Warranties Insurance (RWI) or Warranty and Indemnity Insurance (W&I)—provides a strategic insurance solution for transferring M&A risks and protecting deal value. This specialized M&A insurance coverage can be arranged by either the buyer or the seller and is designed to enhance deal certainty, facilitate smoother negotiations, reduce escrow requirements, and protect both parties against unforeseen post-closing liabilities and indemnification claims.

For purchasers, key benefits include:

• Financial protection in the event of a breach of a representation or warranty by the seller

• The ability to negotiate reduced indemnification obligations or escrow requirements

• Extension of the survival period for representations and warranties beyond standard contractual limits

For sellers, advantages may include:

• Protection against financial loss resulting from alleged or actual breaches

• Reduced post-closing indemnity obligations, including escrow or holdback arrangements

• Coverage for unintentional or unknown breaches, enabling a cleaner and more definitive exit

Representations and Warranties Insurance can serve as a critical enabler in facilitating smoother M&A negotiations, accelerating deal closings, improving competitive positioning in auction processes, and limiting post-transaction liability exposure for both buyers and sellers. Our experienced M&A insurance advisors and transactional risk specialists work closely with private equity firms, corporate acquirers, sellers, and their legal and financial advisors to structure tailored RWI solutions aligned with the unique objectives, transaction structure, and risk profile of each Canadian M&A deal. Contact us to discuss how Transactional Risk Insurance can enhance your next acquisition or sale.