What claims can teach us: Lessons for financial statements warranties
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Insight Articles 25 February 2025 25 February 2025
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UK & Europe
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Regulatory movement
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Insurance
Given the close collaboration of Clyde & Co’s M&A and claims experts, we have drawn lessons from our extensive experience in M&A and W&I transactions (and the related disputes and claims) to identify and learn from common pitfalls in financial statement warranties.
Between 12% and 24% of all claims under Warranty and Indemnity (W&I) insurance policies involve financial statement warranties. A 2023 survey suggests that this may only be the tip of the iceberg, as almost half of all M&A transactions lead to some form of accounting or financial statement dispute. Although many of these disputes are resolved amicably, unresolved cases typically proceed to confidential arbitration, resulting in limited publicly available data on financial statement warranty claims.
Conclusion
In conclusion, thorough preparation and precise drafting of financial statement warranties are essential to avoid potential disputes. Through clear communication and comprehensive due diligence, risks can be identified early and addressed appropriately, providing better protection for all parties and ensuring a successful transaction.
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