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Tax Issues With M&A Representations, Warranties, and Indemnifications: Reps and Warranty Insurance, Proceeds

Recording of a 90-minute premium CLE/CPE video webinar with Q&A

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Conducted on Tuesday, August 1, 2023

Recorded event now available

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This CLE/CPE course will guide tax counsel and advisers on the tax ramifications of representations, warranties, and indemnification provisions in mergers and acquisitions. The panel will discuss critical tax considerations for indemnification payments and losses and representation and warranty insurance.

Description

Representation and warranty provisions are critical components of M&A deals. The use of representation and warranty insurance has drastically changed the landscape of how these important deal terms are negotiated. Counsel and advisers must carefully consider these provisions and their tax implications when structuring purchase agreements.

In a traditional M&A transaction, a seller agrees to indemnify the buyer for breaches of the seller's representations and warranties, but this indemnification obligation is often subject to caps, exclusions, and time limits. Typically, the indemnity is backed by an escrow of a portion of the proceeds payable at the closing; however, most M&A deals now incorporate representation and warranty insurance to outsource the risk of loss from a breach of representations and warranties by sellers.

Although representation and warranty insurance is not a solution for every transaction, these insurance policies can be favorable for buyers and sellers. They may be the only protection for a buyer in a no-indemnity transaction. Counsel and advisers must understand key tax considerations for representation and warranty provisions in purchase agreements and reps and warranties insurance policies.

Listen as our panel discusses critical tax provisions relating to purchase price payments and adjustments and key tax considerations for representation and warranty insurance.

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Outline

  1. Tax considerations in M&A reps, warranty, and indemnification provisions
  2. Utilizing insurance and key tax provisions in reps and warranties policies
  3. Tax treatment of indemnification payment
  4. Tax treatment of insurance costs
  5. Best practices

Benefits

The panel will discuss these and other key issues:

  • How is representation and warranty insurance used in mergers and acquisitions?
  • What are the key tax considerations for representation and warranty insurance?
  • What is the tax treatment of indemnification payments?
  • What is the tax treatment of insurance costs?
  • What are the advantages of representations and warranties insurance to buyers and sellers?
  • Use of representation and warranty insurance in REIT and S corporation transactions

Faculty

Kaden, Gregory
Gregory O. Kaden
Director
Goulston & Storrs

Mr. Kaden is a corporate attorney with extensive experience representing buyers and sellers in M&A deals, lenders...  |  Read More

Stein, Jonathan
Jonathan Stein
Director
Goulston & Storrs

Mr. Stein advises public and private companies, investment funds and real estate investors on corporate,...  |  Read More

Williams, Alexandria
Alexandria (Andria) Williams
Attorney
Goulston & Storrs

Ms. Williams is an attorney in the firm’s tax group advising U.S. corporations, S corporations, and REITs. She...  |  Read More

Access Anytime, Anywhere

Strafford will process CLE credit for one person on each recording. CPE credit is not available on recordings. All formats include course handouts.

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