San Mateo, Calif. – ABD Insurance and Financial Services announced today that it will now offer Residual Transaction Liability Insurance coverage for venture capital firms that reduces the risk of indemnity claims associated with the mergers & acquisitions process.
While representation and warranty (R&W) insurance has traditionally protected the interests of private equity firms when purchasing a company, there has been little guarantee for venture capitalists participating on the sell-side of an agreement.
“ABD has always been committed to adding value to the venture capital community and we’re pleased that we can now provide an innovative solution that meets the needs of VC firms looking to quickly return funds to investors,” said Senior Vice President Josh Warren of ABD’s M&A Advisory Practice. “Equally as important, when VC firms have to manage inactive funds, indemnification obligations can drag on for years resulting in many thousands of dollars in legal, accounting, and staff fees. The uniquely targeted product we’ve created builds on our strong R&W expertise and provides the venture capital community with an important new tool to manage risk.”
ABD’s new residual transaction liability insurance can be purchased as a one-time premium payment that covers single or multiple exits, allowing VC firms to pay limited partners earlier after exiting an investment, boosting their balance sheets and reducing the administrative burden of managing indemnity obligations.
Venture capital investors and advisors have welcomed the novel offering, calling it a “much needed solution on Sand Hill Road for de-risking distributions”, “a fantastic way to reduce the administrative cost of zombie funds.”
“VCs are competing for the same LP dollars. Funds that can provide returns faster to their LPs are more attractive to LPs. In the same way that R&W insurance improved bid competitiveness for private equity, RTLI is improving exit competitiveness for venture capital,” said Matt Somma, VP of Transaction Risk at ABD and a former R&W underwriter. “I believe that the use of this product will become increasingly popular among VC firms as they look for ways to protect LP proceeds and close out funds.”
ABD Insurance and Financial Services provides risk management, insurance brokerage, human resources, and retirement consulting services. Our advisors offer guidance and craft innovative solutions to help address risk for clients of varying sizes, growth stages, and industries.
Headquartered in San Mateo, ABD has offices throughout California, Washington, Illinois, and New York and is home to over 350 employees who serve clients across the United States and globally. To learn more, visit: www.theABDteam.com.
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