In an article for the Atlanta Business Chronicle, MMM Partner Eric Larson explores the critical role of risk mitigation in M&A transactions, highlighting the importance of protecting deal value by utilizing tools such as representations and warranties insurance (RWI), escrows, and holdbacks.
Larson explains how RWI has become a preferred option in many deals, particularly in competitive bidding situations where sellers are reluctant to accept post-closing indemnification obligations. He outlines when RWI is appropriate, how claims are made and resolved, and the advantages and limitations of using insurance as a risk allocation tool.
In addition to RWI, Larson examines the role of escrows and holdbacks, which provide buyers with direct access to funds for indemnification claims. He discusses the differences between third-party escrows, which offer a neutral safeguard, and buyer holdbacks, which give purchasers more control but may be less attractive to sellers. By comparing these risk mitigation strategies, Larson provides practical guidance for structuring M&A agreements that ensure a smoother and more secure deal process.
Read more here.
