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Growing Diversity in the W&I Market
The market for Warranty & Indemnity (W&I) insurance and single-risk insurance has been evolving dynamically for years. Ever-expanding areas of application, more flexible coverage concepts, and declining costs have increased the appeal of these products. One of the most significant innovations is the introduction of specialized Small Deals Insurance, which covers transactions with an enterprise value ranging from 0 euros to approximately 15 million euros —a segment that was previously rarely insured.
Basic Principle: Protection for Buyers, Security for Sellers
As with traditional W&I solutions, the focus here is on warranty protection. Instead of the seller being liable for breaches of contract, the insurer assumes the risk. For sellers, this means the purchase price can be received in full after closing—and is often even higher, since the buyer receives additional protection at the same time. This reduces the tension between risk transfer and purchase price protection.
Challenges in Smaller Deals: Due Diligence and Warranty Negotiations
Traditional W&I insurance requires comprehensive due diligence—typically in the legal, financial, and tax areas. In the small-cap segment, however, buyers often forego external reviews, whether for time or cost reasons. Furthermore, a conventional W&I solution requires negotiated warranties in the purchase agreement—a time-consuming process that can be disproportionate for small deals.
This is precisely where a gap arises: Without due diligence and without detailed warranty negotiations, traditional W&I products are often not an option.
Small Deals Insurance – W&I Without Due Diligence and Without Warranties
Malakut closes this gap with a new, market-aligned solution: For the first time, insurance is available for transactions up to 15 million euros —without any due diligence or seller warranties. The concept works as follows:
Disclosure / Q&A from the seller directly to the insurer
The insurer issues a ready-made policy with its own guarantees
The buyer signs the policy and receives coverage of up to 2.5 million euros
One-time cost: approx. 55,000 euros
Benefits for Buyers and Sellers
This solution addresses several risks at once:
For the buyer: Protection despite a lack of due diligence—no “blind purchase”
For sellers: No warranty liability, no escrow obligation
For both parties: Shorter negotiation period and lower transaction costs
Instead of complex contract negotiations, a ready-to-use insurance policy is established within a few business days—based on existing documents in the data room.
Conclusion: Pragmatic protection for small-cap deals
Small Deals Insurance offers a practical way to protect M&A transactions in the lower market segment—without the typical hurdles of traditional W&I concepts. Buyers receive protection, and sellers gain planning certainty. This establishes a new tool that could become an important component of transaction practice, particularly in the small- and mid-cap sectors.
This is a guest post by Philip Frerks, Head of M&A at Malakut.
