Dec 20, 2023
In episode #32 of the Founder's Guide Post Podcast, I had a conversation with Gaurav Sud, who works at Lockton Companies with a lot of experience in mergers and acquisitions.
He's an expert in a special type of insurance called representation and warranty (rep and warranty) insurance, which is really important for business sales. Gaurav explains how rep and warranty insurance helps handle risks when selling a business. It's a better way than the usual methods because it makes things easier and more financially beneficial for everyone involved. We talked about how this insurance takes into account the risks known and unknown in a business deal, moving these risks from the people in the deal to the insurance company.
Gaurav also shares how both buyers and sellers gain from this insurance. For sellers, it means they can get all their money from the sale without having to wait, and buyers still get to keep their safety net.
He mentions that these insurance plans are based on the due diligence done by the buyer, which makes things less complicated for the seller.
The discussion covers how the cost of these insurance policies can change based on different factors like the state of the market and how complex the business is.
What You’ll Learn:
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Role of Rep and Warranty Insurance: This insurance addresses the risk allocation in business transactions, transferring these risks from the involved parties to the insurance market.
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Benefits for Buyers and Sellers: Sellers can immediately receive full sale proceeds, avoiding escrow, while buyers maintain their protective coverage.
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Understanding Insurance Policies: The pricing of these policies generally ranges between 2.5% to 5% of the insured amount.
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About Gaurav Sud:
Gaurav joined Lockton’s Transaction Liability Practice in 2021 and serves as a Partner and Co-Practice Leader within the market-leading team. He specializes in brokering deals in the technology industry. Gaurav has more than 15 years of experience in the M&A world. He began his professional career as a Paralegal at Wachtell Lipton in their M&A group, a firm ranked consistently at the top of the M&A category by Vault. Next, Gaurav practiced at Shearman & Sterling, where he worked in their M&A group, dealing with distressed M&A deals from 2007-2011. After moving to California in 2011, Sud started at Fenwick & West, where he worked on deals involving private equity, M&A, venture capital financing and corporate governing. Gaurav joined Aon three years later as a Senior Vice President before his promotion to the role of Senior Managing Director.