How RWI is Transforming Private Equity | USA
In this Chambers Expert Focus video, Mitchell Roth and Michael Shaw of Much Shelist discuss the evolution of representation and warranties insurance (RWI), as well as providing an insight into the effective use of RWI policies.
Michael Shaw
Over the course of the past ten years, we have really seen the evolution of RWI become more available on some of the smaller deals.
While, previously, RWI had been reserved for larger deals, the past decade has seen underwriters become more comfortable writing smaller policies.
RWI policies are now available on some smaller add-on acquisitions, and policies as small as USD1-2 million have begun to be underwritten.
Where an RWI policy is involved, a buyer does not have to worry about going after a seller who is now working for them, instead the private equity firm can seek indemnification against an insurance company.
This will alleviate a buyer's concerns and allow them to feel more secure in relation to indemnification claims.
We found a solution where all transactions of any size or shape would be included in the policy, making transactions, large or small, much more efficient and easy to complete.
This consolidation of all of a client's transactions into one RWI policy means that, for smaller transactions, they are able to get deals where sellers would never sell to them otherwise because of escrows or the indemnity risk.
Another benefit of this type of policy is that all pricing is negotiated up front, leading to pricing certainty.
Much Shelist P.C.
