SME Mergers and Acquisitions Insurance
Big-scale reassurance for small business sales
SME Mergers and Acquisitions Insurance
Think M&A insurance is only available for huge corporate transactions? Not anymore.
M&A insurance is now available for the sale of small and mid-corporate businesses between the value of £250k and £20m. Unlike traditional Mergers and Acquisitions policies (sometimes known as Warranty and Indemnity Insurance, or W&I), underwriting is streamlined and, in most cases, we can indicate likely costs in as little as two working days.
What is Mergers and Acquisitions Insurance?
SME Mergers and Acquisitions insurance is a brand-new insurance that gives you peace of mind when selling your small business, knowing cover is in place for innocent mistakes or misrepresentations.
This ‘merger insurance’ is also known as transactional liability insurance (since it protects you from transaction risk), but we like to keep things simple, so we’ll stick to SME M&A insurance.
M&A insurance covers shareholders for their liability under warranties in the Sale and Purchase Agreement, arising from an accidental mistake in disclosures about your business’ financial health, assets, liabilities, employees, property, or tax history, as described in the Sale and Purchase Agreement. It’s a one-off premium but cover lasts for 7 years.
M&A insurance covers shareholders for their liability under warranties in the Sale and Purchase Agreement
Get peace of mind for 7 years – SME M&A cover starts from under £4k
- Reading 0118 916 5480
- Marlow 01628 532 613
What does Mergers and Acquisitions Insurance Cover?
-
Accidental breach of warranties: cover for financial loss or liability following a breach of a warranty in the Sale and Purchase Agreement.
-
Defence costs: cover to defend yourself if accused of accidental misrepresentation or inaccuracy.
-
Full indemnity: traditional warranties and indemnities policies are often arranged with cover at around 10% of the sale value, although higher limits can sometimes be obtained depending on the transaction. In contrast, the SME mergers and acquisitions policy can pay out up to 100% of the enterprise value (up to £20m).
-
Claims paid direct to buyer: you can add your buyer as a ‘loss payee’, which means any settled claims are paid directly to your buyer.
-
Fraud and Negligent Misrepresentation: buyers can take out a separate, optional FNM policy to protect themselves against fraudulent or negligent misrepresentation by the seller.
“It was a no-brainer for me to invest in this insurance vs the potential cost of being sued.”
“When you sell your business, the Sale and Purchase Agreement will include warranties about the business’s financial health, assets, liabilities, employees, property, and taxes, based in disclosures made by the shareholders. If issues or innocent errors on disclosures made are discovered after the transaction completes, your buyer may be entitled to take action against you for misrepresentation. Depending on the nature of the error, claims could be made for up to seven years after the sale.”
John Goodson – Client Director, Macbeth
Who needs SME Mergers and Acquisitions insurance?
M&A insurance is ideal for the sale of micro and small businesses between the value of £250k and £20m. It’s particularly useful for sellers of manufacturing, education, franchise, retail, leisure, hospitality and property businesses, as well as professional services businesses, technology and transport companies and insurance brokers.
Those concerned about warranties within a proposed Sale and Purchase agreement can be reassured that they are indemnified, should such clauses be called-on post-sale – a useful means of helping sellers and their solicitors to reach agreement on terms with potential buyers.
The cover can also reduce the need for escrow (where a 3rd party holds a portion of the purchase price to protect buyers), so sale funds are released much quicker.
-
SME M&A insurance for sellers
When you sell all or part of a business, you are likely to be liable for any accidental misrepresentations made about the business you’ve sold for up to seven years after the sale.
So, mergers and acquisitions insurance covers you for seven years for financial loss or liability following a breach of a warranty in the Sale and Purchase Agreement. Merger insurance will also pay for defence costs if you’re accused of accidental misrepresentation.
This means you get to make a clean exit from your business, and you don’t have to worry about being sued for an innocent mistake long after you’ve sold.
-
SME M&A insurance for buyers
If you choose to, the buyer can also be named on your policy as a ‘loss payee’, meaning that if a claim against you is successful, the insurer can make settlement direct to the buyer.
While policies available to sellers cover innocent errors in disclosure, buyers can also take out a separate, optional Misrepresentation policy to protect against fraudulent or negligent misrepresentation by the seller.
Why choose Macbeth as your mergers and acquisitions broker?
- We have practical, lived experience of small business acquisitions
- We’re independent
- We’re Chartered (which means you can trust us)
- You’ll always get to deal with a real, human person (no bots or self-service here)
- We have an in-house claims team (it’s included for free in every policy)
Mergers & Acquisitions FAQs
I didn’t realise I would be liable for 7 years - I’ve already sold my business, can I still get M&A insurance?
Yes, you can take out SME mergers and acquisitions insurance shortly after the sale of your business, as long as a situation hasn’t arisen which may lead to a claim.
What’s the difference between M&A Insurance and Warranty and Indemnity Insurance?
W&I insurance is traditionally for large corporate transactions and sometimes only covers 10% of the sale value. SME mergers and acquisitions insurance is for smaller business sales and can pay out up to 100% of the enterprise value (up to £20m).
You may also be interested in
Subscribe to our newsletter to receive all our latest insights