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For two hundred years, the modus operandi of the insurance industry has been to follow the status quo. Today, protecting and growing your business demands a new perspective. It is time for a different way of looking at risk.
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Mergers and acquisitions (M&A) insurance is a type of insurance policy that helps protect parties involved in a M&A transaction from financial loss resulting from unforeseen issues that may arise during the transaction process.
Coverage Scope
Representation and Warranty Insurance (RWI): RWI is one of the most common forms of M&A insurance. It covers breaches of representations and warranties made by the seller in the purchase agreement. If a breach is discovered post-transaction, RWI provides financial protection to the buyer.
Contingent Liability Insurance: This coverage protects buyers in cases where they assume contingent liabilities or unknown risks associated with the acquired business. It can include coverage for tax liabilities, litigation, or environmental issues.
Tax Liability Insurance: In transactions involving tax-related risks, this insurance can provide coverage for potential tax liabilities, including transfer pricing disputes, audits, or other tax issues.
Specific Issue Insurance: M&A insurance can be customized to cover specific issues or concerns identified during due diligence, such as pending litigation, intellectual property risks, or product liability concerns.
Benefits
Risk Mitigation: M&A insurance helps manage and mitigate the financial risks associated with undisclosed or unknown liabilities that may surface after the transaction has closed.
Enhanced Negotiation: It can facilitate negotiations between buyers and sellers by providing a solution for addressing potential disagreements or uncertainties.
Preservation of Funds: Sellers can use M&A insurance to ring-fence funds in escrow, allowing them to access the sale proceeds sooner while providing financial protection to the buyer.
Deal Certainty: Buyers gain confidence in the transaction's stability and viability, which can lead to more efficient and successful M&A deals.
Are you looking to buy another company? Folding its property, customers and employees into your organization is no small feat. Even if you plan to keep it as a subsidiary, you need to do full due diligence on the insurance aspect of the deal. This rundown can help you prepare so your transaction doesn’t fall through or saddle you with regret.
Are you looking to buy another company? Folding its property, customers and employees into your organization is no small feat. Even if you plan to keep it as a subsidiary, you need to do full due diligence on the insurance aspect of the deal. This rundown can help you prepare so your transaction doesn’t fall through or saddle you with regret.
Cyber insurance provides more than just financial recovery, offering risk mitigation tools like incident response planning, breach response services, cybersecurity training, and pre-breach assessments to help businesses prevent and manage cyber threats. However, coverage for global operations, biometric privacy claims, and newly acquired entities varies by policy, so businesses must carefully evaluate their plans to ensure they receive both proactive security support and financial protection.
For real estate and property management clients, balancing the cost-saving benefits of higher insurance deductibles with lender requirements can be challenging. Strategies such as deductible buy down policies, indemnity agreements, and reimbursement policies help insureds reduce premiums while meeting lender expectations. Additionally, effective collateral management, including alternatives like letters of credit and third-party trust arrangements, is critical for clients navigating the increasing costs and evolving requirements of loss-sensitive insurance programs.
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