By Dr. Sandra Link, LL.M. King & Wood Mallesons’ Frankfurt office.
During the last years, the number of Chinese outbound transactions to Germany have increased considerably and reached a record high in 2016. M&A transactions are quite complex processes, presenting a wide range of potential pitfalls for both buyers and sellers. Often, Chinese investors are not familiar with the particularities of the European market. Against this backdrop, the need to mitigate transactional risk is increasing in particular for Chinese investors.
The use of Warranty & Indemnity (W&I) insurance, has become commonplace in the US and European M&A markets over the last years. Whilst the product is less well-known in the Chinese market, the gap is starting to close and a leading W&I insurer has already established a Chinese desk in Germany to meet the special needs of Chinese clients. With SASAC having emphasized the importance of risk insurance in the context of outbound investments for SOEs in their regulation of 7 January 2017, we expect the importance of W&I insurance for Chinese outbound M&A to further increase.
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