“Jerk Partner Insurance” Protects Sellers in Buyout Dispute

What is “Jerk Insurance”?

“Jerk insurance” is a safety net to prevent an owner from regretting that he or she was a jerk, or a fool. The insurance is intended to protect the business owner who sells his or her equity stake to a co-owner who then turns around and sells the company or its assets to an outside buyer at a much higher value. The insurance benefits both parties. The co-owner buyer wants the insurance not because of an intent to quickly resell the acquired interest, but to reassure the seller that the offered deal is fair. The seller wants the insurance because it protects against a mistake defining the price.

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