Vendor due diligence is becoming increasingly common in Latin American M&A, but a lack of professional insurance in the region means that reliance letters take even more importance. At an overcrowded session at the International Bar Association conference, Carlos Urrutia of Brigard & Urrutia of Colombia explained the problem.
“Professional liability insurance is not widely held in Latin America,” he said. “And if a firm does have insurance, then it is for a fraction of the value of European levels. Law firms therefore have to be very careful. The reliance letters that they draft must cover liability caps and have disclaimers or the law firm could fold.”
Vendor due diligence is conducted by sellers who want to make it easy to generate interest in an auction and do not want multiple bidders conducting their own diligence at the same time. It is extremely beneficial to the...