Insuring against unknown factors in mergers and acquisitions
Published 22 January 2021
In anticipation of increased mergers and acquisitions activity for local and global business buy and sell transactions influenced by the forces of COVID-19 business impacts and uncertain economic conditions, insurers are looking to new uses of cover to for businesses to ensure they’re covered for unknown risks as well as the known.
In response to the need for increased caution buyers are proactively taking out insurance against a pending dispute or litigation risk, to take the issue off the table immediately rather than entering protracted negotiations with the seller. Similarly sellers are taking out insurance to circumvent problems before the deal goes to market.
Against this background of caution synthetic warranty and indemnity policies can potentially be used in distressed sales where all of the required information may be known by the administrator.
Economic conditions have resulted in M&A insurance innovations
Due to an increase in distressed businesses, M&A is becoming increasingly complex and heavily negotiated
Insurance market is being prepared for a potential rise in synthetic W&I policies to cover unknowns
National Practice Leader M&A Insurance Services Antony Butcher
With 20-plus years in risk and insurance Antony Butcher has embedded experience in Australia, London,Hong Kong and China, having responsibility for providing M&A and transactional advice tocorporates, pension/infrastructure funds, private equity and governments.