A buyer was identified for a distressed PE-held company but the sale was hampered by the fact that the two executive directors had recently left the business and been replaced by temporary management who had been instructed to execute the transaction. The buyer was concerned about potential liabilities in the target business, the likely limited disclosure the management team could undertake and the limited covenant strength of management standing behind the warranties.

The buyer required a limited set of warranties ranging from fundamental to tax warranties. Without such protection the sale would not proceed.

We worked together with the lawyers, the PE client, the remaining non-executive director and financial controller (who had knowledge of the business) to agree a suitable set of warranties in the circumstances. An insurance policy was issued to the acquiring company providing the buyer with sufficient comfort and allowing the PE fund to cap its liability at £1 and distribute proceeds.