Innovative M&A insurance for the SMB market
Innovative M&A insurance foe SME
Glossary
Glossary
Business acquisitions come with a lot of terminology. Here are the most important concepts, explained in plain language.
Business acquisitions come with a lot of terminology. Here are the most important concepts, explained in plain language.
Business acquisitions come with a lot of terminology. Here are the most important concepts, explained in plain language.
Business acquisitions come with a lot of terminology. Here are the most important concepts, explained in plain language.
Share Purchase Agreement (SPA)
The legally binding agreement that governs the terms of a business acquisition. The agreement contains the warranties that the seller provides about the target company, and it is these warranties that transaction liability insurance primarily covers.
Clean Exit
One of the main goals for a seller. A clean exit means the seller can walk away from the transaction without remaining financial responsibility for future warranty breaches. Transaction liability insurance is the most effective tool for achieving this.
De Minimis
A threshold value for minor damages. To avoid administration around many small claims, an agreement is made that individual damages below a certain amount are not counted when summing damages to reach the deductible.
Due Diligence (DD)
The buyer's review and examination of the target company. A thorough due diligence in areas such as finance, legal and tax is typically a prerequisite for traditional W&I insurance. Bille does not require formal due diligence reports. You still need to have reviewed the business. The difference is that you do not need to produce a formal DD report.
Escrow
A traditional method of securing the buyer's potential claims against the seller. A portion of the purchase price is deposited in an escrow account for a certain period. Transaction liability insurance is a modern alternative that typically costs less and provides broader coverage.
Insurance Amount (Limit of Indemnity)
The maximum amount that the insurance can pay out in the event of a claim. With Bille, the insured amount is 100% of the purchase price.
Insurance Period
The time period during which the insurance is valid and claims can be made. With Bille, general warranties are covered for 18 months from the date of closing. Tax warranties are covered for up to 36 months.
Warranties
The representations and promises that a seller makes in the share purchase agreement about the target company's condition, operations, and financial position. If a warranty turns out to be incorrect, a warranty breach has occurred.
Known Risks
Risks or problems identified during the due diligence process. These are normally excluded from insurance coverage and must be handled separately. Transaction liability insurance covers unknown risks.
Buy-side Policy
The most common type of W&I insurance, where the buyer is the policyholder. This allows the buyer to direct their claim against the insurance company instead of against the seller.
Purchase Price
The total price that the buyer pays to acquire the target company. The purchase price can consist of several parts: cash payment, shares, or earn-outs.
Leakage
Unauthorized value transfers from the target company to the seller during the period between signing and completion. Breaches of leakage warranties are normally covered by W&I insurance.
M&A (Mergers & Acquisitions)
The umbrella term for corporate mergers and acquisitions.
Deductible
The portion of a claim that the policyholder must bear before the insurance begins to pay. The deductible in W&I insurance is often "tipping", meaning when damages exceed the deductible level, the insurance pays out the entire amount from the first unit. Normally 0.5 to 1.5% of the purchase price.
Indemnity
A specific compensation obligation in the agreement that covers an identified and specific risk.
Claims
The process where the policyholder reports a loss to the insurance company to receive compensation. A smooth and efficient claims process is one of the most important aspects of a good transaction liability insurance.
SME (Small and Medium-sized Enterprises)
Companies with up to 250 employees. In M&A, the term often refers to companies with revenue between approximately $0.5M and $50M.
Underwriting
The insurer's risk assessment process. An underwriter reviews the buyer's due diligence material and the share purchase agreement to assess the risk and determine the terms for the insurance.
W&I Insurance (Warranty & Indemnity Insurance)
Insurance designed for business transactions that protects against financial loss from breaches of the warranties and indemnities provided in a share purchase agreement.
Share Purchase Agreement (SPA)
The legally binding agreement that governs the terms of a business acquisition. The agreement contains the warranties that the seller provides about the target company, and it is these warranties that transaction liability insurance primarily covers.
Clean Exit
One of the main goals for a seller. A clean exit means the seller can walk away from the transaction without remaining financial responsibility for future warranty breaches. Transaction liability insurance is the most effective tool for achieving this.
De Minimis
A threshold value for minor damages. To avoid administration around many small claims, an agreement is made that individual damages below a certain amount are not counted when summing damages to reach the deductible.
Due Diligence (DD)
The buyer's review and examination of the target company. A thorough due diligence in areas such as finance, legal and tax is typically a prerequisite for traditional W&I insurance. Bille does not require formal due diligence reports. You still need to have reviewed the business. The difference is that you do not need to produce a formal DD report.
Escrow
A traditional method of securing the buyer's potential claims against the seller. A portion of the purchase price is deposited in an escrow account for a certain period. Transaction liability insurance is a modern alternative that typically costs less and provides broader coverage.
Insurance Amount (Limit of Indemnity)
The maximum amount that the insurance can pay out in the event of a claim. With Bille, the insured amount is 100% of the purchase price.
Insurance Period
The time period during which the insurance is valid and claims can be made. With Bille, general warranties are covered for 18 months from the date of closing. Tax warranties are covered for up to 36 months.
Warranties
The representations and promises that a seller makes in the share purchase agreement about the target company's condition, operations, and financial position. If a warranty turns out to be incorrect, a warranty breach has occurred.
Known Risks
Risks or problems identified during the due diligence process. These are normally excluded from insurance coverage and must be handled separately. Transaction liability insurance covers unknown risks.
Buy-side Policy
The most common type of W&I insurance, where the buyer is the policyholder. This allows the buyer to direct their claim against the insurance company instead of against the seller.
Purchase Price
The total price that the buyer pays to acquire the target company. The purchase price can consist of several parts: cash payment, shares, or earn-outs.
Leakage
Unauthorized value transfers from the target company to the seller during the period between signing and completion. Breaches of leakage warranties are normally covered by W&I insurance.
M&A (Mergers & Acquisitions)
The umbrella term for corporate mergers and acquisitions.
Deductible
The portion of a claim that the policyholder must bear before the insurance begins to pay. The deductible in W&I insurance is often "tipping", meaning when damages exceed the deductible level, the insurance pays out the entire amount from the first unit. Normally 0.5 to 1.5% of the purchase price.
Indemnity
A specific compensation obligation in the agreement that covers an identified and specific risk.
Claims
The process where the policyholder reports a loss to the insurance company to receive compensation. A smooth and efficient claims process is one of the most important aspects of a good transaction liability insurance.
SME (Small and Medium-sized Enterprises)
Companies with up to 250 employees. In M&A, the term often refers to companies with revenue between approximately $0.5M and $50M.
Underwriting
The insurer's risk assessment process. An underwriter reviews the buyer's due diligence material and the share purchase agreement to assess the risk and determine the terms for the insurance.
W&I Insurance (Warranty & Indemnity Insurance)
Insurance designed for business transactions that protects against financial loss from breaches of the warranties and indemnities provided in a share purchase agreement.
Share Purchase Agreement (SPA)
The legally binding agreement that governs the terms of a business acquisition. The agreement contains the warranties that the seller provides about the target company, and it is these warranties that transaction liability insurance primarily covers.
Clean Exit
One of the main goals for a seller. A clean exit means the seller can walk away from the transaction without remaining financial responsibility for future warranty breaches. Transaction liability insurance is the most effective tool for achieving this.
De Minimis
A threshold value for minor damages. To avoid administration around many small claims, an agreement is made that individual damages below a certain amount are not counted when summing damages to reach the deductible.
Due Diligence (DD)
The buyer's review and examination of the target company. A thorough due diligence in areas such as finance, legal and tax is typically a prerequisite for traditional W&I insurance. Bille does not require formal due diligence reports. You still need to have reviewed the business. The difference is that you do not need to produce a formal DD report.
Escrow
A traditional method of securing the buyer's potential claims against the seller. A portion of the purchase price is deposited in an escrow account for a certain period. Transaction liability insurance is a modern alternative that typically costs less and provides broader coverage.
Insurance Amount (Limit of Indemnity)
The maximum amount that the insurance can pay out in the event of a claim. With Bille, the insured amount is 100% of the purchase price.
Insurance Period
The time period during which the insurance is valid and claims can be made. With Bille, general warranties are covered for 18 months from the date of closing. Tax warranties are covered for up to 36 months.
Warranties
The representations and promises that a seller makes in the share purchase agreement about the target company's condition, operations, and financial position. If a warranty turns out to be incorrect, a warranty breach has occurred.
Known Risks
Risks or problems identified during the due diligence process. These are normally excluded from insurance coverage and must be handled separately. Transaction liability insurance covers unknown risks.
Buy-side Policy
The most common type of W&I insurance, where the buyer is the policyholder. This allows the buyer to direct their claim against the insurance company instead of against the seller.
Purchase Price
The total price that the buyer pays to acquire the target company. The purchase price can consist of several parts: cash payment, shares, or earn-outs.
Leakage
Unauthorized value transfers from the target company to the seller during the period between signing and completion. Breaches of leakage warranties are normally covered by W&I insurance.
M&A (Mergers & Acquisitions)
The umbrella term for corporate mergers and acquisitions.
Deductible
The portion of a claim that the policyholder must bear before the insurance begins to pay. The deductible in W&I insurance is often "tipping", meaning when damages exceed the deductible level, the insurance pays out the entire amount from the first unit. Normally 0.5 to 1.5% of the purchase price.
Indemnity
A specific compensation obligation in the agreement that covers an identified and specific risk.
Claims
The process where the policyholder reports a loss to the insurance company to receive compensation. A smooth and efficient claims process is one of the most important aspects of a good transaction liability insurance.
SME (Small and Medium-sized Enterprises)
Companies with up to 250 employees. In M&A, the term often refers to companies with revenue between approximately $0.5M and $50M.
Underwriting
The insurer's risk assessment process. An underwriter reviews the buyer's due diligence material and the share purchase agreement to assess the risk and determine the terms for the insurance.
W&I Insurance (Warranty & Indemnity Insurance)
Insurance designed for business transactions that protects against financial loss from breaches of the warranties and indemnities provided in a share purchase agreement.