It is becoming increasingly common in Denmark for the parties to an M&A transaction to take out insurance in order to cover potentially dealbreaking issues and to provide certainty and finality. Insurance has been used in this way in the United States for quite some time and is becoming increasingly common in European jurisdictions.
The typical buyers of warranty and indemnity insurance for M&A transactions are:
- private equity firms;
- listed entities buying from private equity firms;
- purchasers of financially distressed companies;
- transactions involving special purpose vehicles;
- sellers of family businesses; and
- conservative buyers and sellers.
It is a prerequisite that the party seeking insurance has carried out reasonable due diligence on the transaction.
The minimum time requirement for organizing insurance for a deal is around two weeks, during which time the potential insurer familiarizes itself with the issues in question, carries out its own due diligence and tailors the policy accordingly.
The standard premium level is between 3% and 9% of the insurance limit and due diligence fees.
Generally, insurance is not an option for deals with a premium of below €150,000.
For further information on this topic please contact Philip Risbjørn at Bech-Bruun Dragsted by telephone (+45 7227 0000) or by fax (+45 7227 0027) or by email ([email protected]).