The Importance of RWI Cover

April 23 - Nothing is sure in the business world today, and even the most solid merger attempts can sometimes become financial nightmares - despite the best intentions.

Many things are involved in mergers and acquisitions within the business world, and a large number of things can go wrong until and even after the merger.

For that reason, analysts stress the importance of insisting on Representations and Warranties Insurance (RWI) as part of a greater Merger and Acquisitions insurance policy.

"Despite senior teams arming themselves with well interrogated financial statements, minutely researched market projections, and world class organizational due diligence processes, it is surprising how often inaccuracies creep in," warned a senior manager with Alexander Forbes Risk, Angela Jack.

A number of things can cause a deal to suddenly turn sour, including the sudden change of trading conditions that could turn a very solid looking deal into one that seems a horrific idea only a few months down the line.

"Deals fall through because the parties involved either fail to come to terms, or one of them fails to meet their obligations under the initial agreement," said Jack.

RWI policies are created to suit the specific requirements of each individual deal, and take into account things such as environmental risk, intellectual property liabilities and financial statement representation.

If problems evolve in any of these many fields and the deal falls through, RWI "ensures that the sellers get their money out while assisting buyers meet their payment obligations within guaranteed timeframes."