Navigating TLPE Insurance For Middle Market M&A Deals

As the merger and acquisition ("M&A") market continues to evolve, buyers and sellers in the $10 million to $100 million range are increasingly looking for ways to manage risk without slowing down the deal process. One option gaining traction is the Transactional Liability Policy Enhancement ("TLPE"). Although it serves a similar purpose as traditional representations and warranties insurance, TLPE is designed specifically for the needs of lower middle market transactions.

What Is TLPE Insurance

TLPE insurance provides protection against financial losses that arise from breaches of representations and warranties in an agreement to sell the assets or shares of a company. It functions much like standard representations and warranties insurance, but it is structured to be more streamlined and cost effective. This can make it a practical fit for transactions that may be too small or too time sensitive for traditional representation and warranty coverage.

Why TLPE Works Well for $10M to $100M Deals

Transactions in this range often encounter challenges when seeking standard representations and warranties insurance. Premiums may be disproportionate to the deal size, underwriting may require extensive diligence, and the process can add time that the parties do not have. TLPE policies address these issues by offering:

• Simplified underwriting, often without the need for third party diligence
• Faster placement timelines that support accelerated deal schedules
• Lower coverage limits with premiums that reflect the economics of smaller transactions
• Greater flexibility for sellers, including cleaner exits for private equity groups and founder-led companies

Common Misconceptions

Some buyers and sellers assume that TLPE is a weaker version of traditional representations and warranties insurance. While TLPE does offer smaller limits and may include certain exclusions, the product is intentionally designed to match the risk profile and budget of middle market transactions. For many deals, it provides the right balance of protection and efficiency.

Is TLPE the Right Fit for Your Transaction?

TLPE is not intended to replace traditional representations and warranties insurance in every situation. Instead, it fills a gap for transactions that benefit from added protection but do not justify the cost or time required for a full policy. When evaluating whether TLPE is appropriate, counsel should consider:

• The structure and complexity of the transaction
• The seller's indemnity position
• The parties' overall risk tolerance

Final Thoughts

As buyers and sellers continue to look for ways to close transactions efficiently while managing exposure, TLPE insurance has become an increasingly valuable tool in the middle market M&A landscape. It offers a practical solution for deals that need meaningful protection without the burden of a full underwriting process.