Explosion of Representation & Warranty Insurance in the Lower Middle Market
With the increased commoditization of information as to what “is market” on M&A transactions, deal lawyers can focus quite a bit of energy on relatively small changes in deal terms. The terms ebb and flow based on market conditions but it is unusual to have a game changing shift. Not so with the use of representation and warranty insurance. The explosion in the use of representation and warranty insurance is well documented with 2015 seeing a dramatic increase in the product being used in lower middle market transactions. With more insurers entering the market, the minimum transaction price continues to drop. We have quickly seen the minimum deal price where the product might fit drop from around $50 million to as low as $25 million. This change can materially impact how you approach a lower middle market transaction.
