Woodruff-Sawyer & Co. Transactional Insurance Practice Overview

Capabilities Overview

2 | Woodruff-Sawyer & Co.

Ws&Co. and RKH Global M&A Practice

Dedicated offices in North America and Europe.

Access to the M&A insurance hubs in New York and London

18 team members, including Qualified US and UK lawyers, Tax Experts and a wealth of long term Transactional Risk Insurance experience.

Cross boarder transactions have team members from both hubs allowing for genuine 24 hour, glob-al access with seamless international placements

In a Merger & Acquisition (M&A) transaction, the Seller is

typically required to indemnify the Buyer for breaches of the

representations and warranties made in the Purchase & Sale

Agreement. The Seller may be required to fund an escrow to

guarantee money is available in the event of a breach.

Representations & Warranties (R&W) insurance comes in two

forms; either the Buyer or Seller can be the insured. The

premium, coverage and underwriting process is slightly different

depending on which party is purchasing. The policy is triggered

by a breach of warranties post close and the loss is the

diminution of value associated with that breach.

Beyond Reps & Warranties are a number of other specialized

solutions to facilitate deal sticking points, including, but not

limited to, Tax Opinion insurance, Loss Portfolio Transfer and

Investment Fund Closure/Contingent Liability insurance.

Transactional Insurances are geared towards breaches of con-

tract and contingent liabilities. This should not be confused with

D&O Tail Coverage that shields Directors for breaches of

fiduciary duty.

3 - 4% of coverage limits required (e.g. 10M at $300,000 - $400,000)

One-time payment for 6 - year policy

Pricing is dependent on the size of retention / escrow and other

deal factors

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Reps and Warranties Insurance

Transaction Overview:

A. Determine optimal

policy structure: buyer

or seller based

B. Rational for transac-

tion

C. “Sale and Purchase

Agreement” or “Deal

Parameters”

Action Items:

A. Due diligence request list

B. Data room index

C. Due diligence reports

D. Fee becomes payable

E. Outside counsel reviews

on behalf of underwriters

and provides report

F. Final Sale/Purchase

Agreement

Action Items:

A. Due diligence

conference call

(underwriter &

counsel, client and

outside counsel,

Insurance broker)

Underwriter action items

Client action items

Other Insurance Products

Tax Opinion Helps reduce or eliminate a contingent tax exposure that is causing a negotiating block

Litigation Buyout Helps put a stop loss on existing and ongoing litigation

Contingent Liability CoverageAssists in protecting against a potential obligation that may be incurred depending on a future

event

Key Markets: AIG, ACE, AWAC, Lloyd’s (Ambridge)

Beazley, Concord, Hiscox, QBE

Coverage: Each contract is individually negotiated

Pricing Parameters: Dependent on the size of Retention/escrow and other deal factors: 3 - 4% of coverage limits required (e.g. 10M at $300,000 - $400,000)

Retention: Customized to the deal

Underwriting Fee: Typically $15K-$25K non-refundable fee due at time of legal review

4 | Woodruff-Sawyer & Co.

Reps and Warranties Insurance

NORTH AMERICA 13%

EUROPE 10%

UNITED KINGDOM 22%

% Of Deals Which Used R&W Insurance

Source: Paragon International Insurance Brokers Ltd

Why the sudden Explosion

Changes in available coverage

­ Definition of Loss to include multiples of EBITDA and

consequential damages

­ Zero seller indemnity structures

Changes in Market ­ Money chasing deals – PE/VC

­ Profitable results – Insurance Market

% Of Deals Which Used R&W Insurance

Changes in Underwriters and process

­ In house lawyers and CPA’s added to staff

­ Greater experience leading to reduction in fear

What does that mean?

­ Zero seller indemnity – how to win at auctions

­ Multiples of loss and consequential damages

­ Get the blessing of your deal lawyers

Source: Paragon International Insurance Brokers

Growth of R&W Insurance in Recent Years

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Mergers & Acquisitions Insurance Solutions

trade sell

Source: Paragon International Insurance Brokers Ltd

NORTH AMERICA 3-3.5%

EUROPE 1.25-1.75%

UNITED KINGDOM 1-1.5%

Regional Pricing (Rate as % of Policy Limit)

Median Policy Limit Purchased As a % of Deal Value

Regional Pricing (Rate as % of Policy Limit)

Source: Paragon International Insurance Brokers Ltd

Source: Paragon International Insurance Brokers Ltd

Global Distribution of R&W Insurance in Deals ( )

6 | Woodruff-Sawyer & Co.

AIG’s Report

Common Wisdom versus Data

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Timing of Claims

Biography

Emily Maier

Transactional Insurance—Group Leader

949.435.7378 emaier@wsandco.com

Leading Woodruff-Sawyer & Co.’s Transactional group, Emily provides consultation and support to clients who wish to use the insurance market to limit the risks that arise from Mergers & Acquisitions activity. This includes Representations and Warranties, Tax Opinion Liability and Litigation Buy-Out coverages.

Emily’s deal experience spans both American and European deals. Her clients are as diverse as their locations. She has worked with both Strategic and Private Equity buyers and sellers over a wide range of transaction sizes and industries.

Prior to joining Woodruff-Sawyer in the United States, Emily specialized in M&A insurance transactions in leading brokerage firms in London, including Marsh, Howden and Heath Lambert. Emily is a popular speaker and published author on the topic of Mergers & Acquisitions insurance.

© Woodruff-Sawyer & Co., 2016

Woodruff-Sawyer & Co.

2 Park Plaza, Suite 500

Irvine, CA 92614

T 844.WSANDCO (844.972.6326)

F 949.476.3118

www.wsandco.com

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