For many business owners, the focus of a sale process is often on valuation.

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But in practice, the outcome of a transaction is just as dependent on how risk is understood, managed and transferred.

In the latest edition of the Value Builders Interview Series, Charlotte Ashton speaks with Guy Ruddy from AON about Warranty & Indemnity (W&I) insurance, and why understanding deal risk earlier can materially improve both confidence and outcomes.

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Why Risk Matters More Than You Think

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When a business enters a sale process, buyers are not simply assessing performance and growth potential.

They are pricing risk, any uncertainty, whether financial, operational or legal, becomes a point of negotiation.

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This can lead to:

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• Reduced headline valuations
  
• Increased use of earn-outs
  
• Delayed or more complex transactions
  
• Greater exposure for the seller post-completion
  

Many founders only encounter these dynamics once they are already deep into a deal. By that stage, their ability to influence the outcome is often limited.

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What Is Warranty & Indemnity Insurance?

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Warranty & Indemnity insurance is designed to protect against losses arising from breaches in the warranties given during a transaction. In simple terms, it allows risk to be transferred from the seller to an insurer.

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This has several advantages:

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• Sellers can achieve a cleaner exit with reduced ongoing liability
  
• Buyers gain protection against unknown risks
  
• Transactions can proceed with greater certainty and efficiency
  
  

While W&I is often associated with larger or private equity-backed deals, its relevance for mid-market businesses is increasing.

Understanding how it works, and what underwriters expect , can significantly improve deal readiness.

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Preparation Starts Earlier Than Most Think

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One of the key insights from the conversation is that W&I is not something to think about at the point of sale. Underwriters assess businesses in much the same way as buyers do.

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They are looking for:

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• Strong financial reporting and transparency
  
• Clear governance structures
  
• Well-documented processes and controls
  
• Evidence of proactive risk management
  
  

Businesses that demonstrate these characteristics tend to move more smoothly through underwriting and transaction processes. Those that don’t often face additional scrutiny, delays or reduced deal confidence.

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The Role of Governance and Advisory Input

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A consistent theme across successful transactions is the strength of governance and advisory support behind the business.

Effective boards, clear reporting structures and access to experienced advisers all contribute to a business that is easier to diligence and lower risk to acquire.

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This is where many privately owned businesses are at a disadvantage. Access to this level of expertise is often associated with investor-backed companies. Yet in reality, it is the quality of advice and preparation, not ownership structure, that determines outcomes.

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Building Optionality Through Early Insight

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The earlier founders understand how risk is assessed in a transaction, the more control they retain. Rather than reacting to issues during due diligence, they can:

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• Identify and address potential value detractors in advance
  
• Strengthen governance and reporting processes
  
• Structure their business in a way that supports a smoother sale
  

This creates optionality. Whether a founder chooses to sell, grow, or step back, a well-prepared business is always in a stronger position.

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Accessing the Right Expertise

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For many business owners the challenge is not willingness to prepare, it is knowing what to focus on and when. That is where access becomes critical. Our Value Builders series is designed to open up conversations with specialists like Guy Ruddy, providing earlier visibility into the considerations that shape transaction outcomes. Sign up for the full series here.

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