Pit & Quarry, October 2018
MANAGEMENT Sellers want the highest price with little or no residual risk or liability Buyers want the lowest price possible with maximum recovery options INSURANCE Much of the risk in an M A transaction can be eliminated with an often overlooked type of insurance W I insurance has evolved from its introduction in the 1970s into a popular and sophisticated tool for protecting buyers and sellers from financial losses in M A transactions W I insurance essentially removes the risk in whole or in part with the promise that underwriters will be standing behind the warranty claim However by offering more protection against downside risk W I insurance also negates the requirement for the use of escrow or indemnities providing certainty and finality to both parties With a sellers W I policy the seller gives warranties and indemnities as is customary but then insures its own risk of a claim Sellers remain liable to the buyer but they are indemnified by the insurance underwriter Thus when a claim occurs the buyer would usually claim against the seller for breach of warranty The seller would look to the insurance company to write a check for all or at least part of the damages being sought A buyers W I policy covers damages following breaches and or fraud as well as defense costs If the seller commits fraud the buyers policy would still pay out TAXING THE M AS TAX BILL Despite the new lower 21 percent corporate tax rate the popularity of tax free M A transactions persists Usually considered reorganizations and similar to taxable deals the buyer uses its stock for a significant portion of the sale price rather than cash or debt Reorganizations while not usually taxable at the entity level are not completely tax free to the seller A reorganization is immediately taxable to the targets shareholders for any boot received Boot is any consideration received by shareholders The National Mining Hall of Fame and Museum is a monument to the memory of the men and women who pioneered the discovery development and processing of our nations natural resources We share the story about mining its people and its importance to the American public through 25000 square feet of interactive and informative exhibits Educational and fun for all ages Located within a National Historic District in the famous 1880 s silver boomtown of Leadville Colorado National Mining Hall of Fame and Museum is The Premier Showcase of American Mining Come in and find out why mining matters to you www mininghalloffame org 36 PIT QUARRY October 2018 pitandquarry com
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