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Protecting Interests in a Heated Market: Insurance Services, Products Evolve to Minimize Risk

March 11, 2019

Following on the heels of 2017’s record-setting financials, mergers and acquisition activity has continued to accelerate in 2018, all while competition for deals continues to be very intense.

Given the current environment of deal velocity and heightened deal competition, the danger of losing a deal to another buyer immediately when the period of exclusivity expires will continue. Seasoned advisory teams, working together to address the financial, legal and insurance elements, help buyers successfully get deals off the starting blocks and over the finish line.

Due diligence can make or break a deal. Too many buyers find themselves inheriting unfortunate surprises, such as an uninsured seven-figure cyber claim, a safety and health violation from a self-insured or captive insurance company, extraordinary health care premium increases and claims, or issues within a company’s retirement plans.

The relentless pursuit to uncover the gaps in coverage, inappropriate/inadequate policies and non-compliance issues that can severely slow or even derail a transaction is paramount in the due diligence phase, be it assessment of insurance coverages, employee benefits, 401(k) plans and more. Once the gaps are identified, placing the right protections can reduce future uncertainty while saving time, and in the long run, costs.

Higher volumes and faster pace mean that managing and allocating risk during the transaction period is more important than ever. As a result, and for good reasons, the use of representations and warranties insurance (RWI), while not new, continues to increase as a means to transfer risk during buy/sell.

As RWI continues to gain traction, more insurers enter the market, creating a more competitive environment. This increased competition has led to RWI policies with improved terms, including reduced premiums and deductibles.

Buyers are also more frequently recognizing the value of other services and products, such as tax liability protection and contingent liabilities. Unique types of protections, such as cyber liability or environmental liability, are used more frequently. We expect this risk reduction specialization to continue.

Additionally, technology advancements overall continue to lessen the time and costs of completing deals, with digital technologies and analytics tools providing quicker and more detailed intelligence at all phases of the transaction.

Time and execution clearly matter when it comes to deals of today; the strength and synchronization of the full advisory teams, working to make each minute, and dollar, count, will help buyers toward a successful closing and on a path to a more valuable transaction.

CLICK HERE to learn more about Oswald’s Private Equity Risk Solutions.

For more information, contact:
Jeffrey Schwab
Senior Vice President, Private Equity

Note: This communication is for informational purposes only. Although every reasonable effort is made to present current and accurate information, Oswald makes no guarantees of any kind and cannot be held liable for any outdated or incorrect information. View our communications policy.