Smoothing and faciliating the M&A process
Mergers and acquisitions (M&A) is a corporate strategy dealing with the buying, selling and combining of different companies with the intent of improving financial performance without the having to create and develop a new entity from the ground up.
Mergers and acquisitions deals are usually considered successful when both the buyer and the seller (or companies merging) emerge from the negotiations having fully taken into account the price paid, created value for their shareholders, the realisable benefits and aware of the potential risks.
The reasons behind the activity may vary widely and common rationales include seeking economies of scale and distribution, creating cross-selling opportunities, purchasing market share, exploiting shared synergies and more effective tax effectiveness.
Mergers and acquisitions insurance is a highly specialised field of cover that specialises in smoothing and facilitating the M&A process. It does this by transferring to an insurance policy certain potential risks to the transaction that are already foreseen, or might surface at a later date.
Any company considering a merger, acquisition or restructure might consider specialist Mergers and Acquisition covers.
AIG offers a range of bespoke products designed for M&A related transactions. These are highly specialised insurance types and are backed up by an international team of skilled insurance professionals who integrate closely with the negotiating parties to create tailored packages.
Type of coverages:
Warranties and Indemnities insurance covers breaches in representations and warranties given as part of the sale of a business. Sellers can cover themselves to prevent sale proceeds being tied up in escrow accounts. Buyers can ensure the warranties have real value, even if the seller is unable to pay a warranty claim which arises some time in the future.
Tax Liability insurance can reduce or eliminate a loss arising from a challenge by the tax authorities of a taxpayer’s tax treatment of a transaction or investment. A taxpayer may have to proceed with a transaction or investment where there was uncertainty in the application of tax laws, or did not have enough time to obtain a tax ruling in advance.
Litigation Buyout insurance ring-fences contingent liabilities and legacy management issues in a company that needs to be transferred in case of an acquisition.