Mergers & Acquisitions Solutions
Aon Mergers & Acquisitions Solutions (AMAS) is the leading provider of insurance due diligence advice and transaction liability insurance solutions to the private equity community and strategic buyers in China.
We complement the work of advisors from other disciplines by identifying insurable risks and cost issues that would not otherwise be considered in depth, but which will have an impact on financial modeling, deal price negotiation and acceptance of liabilities by a buyer.
Our Services: Insurance Due Diligence
- Shortfalls in cover for current and historic risks.
- The true annual cost of insurable risks versus seller estimates (such costs often exceed sellers’ estimates, leaving buyers with unexpected additional expenses).
- Underfunding of accrued self-insured deductible costs, arising from existing claims that have not yet been finalised.
- Inaccurate recording of claims records, which might negatively impact future insurance premium costs.
- Insurance related capital expenditure issues.
- Transfer of responsibility for pre-closing “insurable” liabilities where coverage is unavailable or cost prohibitive for buyers.
- Sale and Purchase Agreement (SPA) wordings leaving buyers and new company directors exposed to liabilities or claims arising from pre-completion circumstances.
Our Services: Transaction Liability Insurance Solutions
Transaction Liability Insurance includes a range of insurance products that buyers and sellers use strategically to cover risks arising from transactions. These Include:
- Warranty & Indemnity Insurance
This covers breaches of seller warranties given in an SPA or similar agreement. Sellers may purchase this (or more commonly propose that a buyer does). This allows the sellers to protect themselves and to allow the distribution or use of the sale proceeds in full, without needing to lock money up as a contingency in the event of a claim for a breach of warranty. For a one-off premium the insurance steps in to meet any claims during the warranty period. Buyers may use this strategically, for example by replacing the warranties offered by a seller with the insurance, or accepting what is offered by the seller but then purchasing insurance that provide s a top-up indemnity and/or a longer period in which to make claims for a breach. In both instances this may sweeten their deal and reduce the potential for blockages in the negotiations.
- Tax-Opinion Liability Insurance
This provides coverage if the opinions of a client’s advisors are successfully challenged (uncertainty arising from opinions on the likelihood of tax treatments may lead to a deal collapsing).
- CFIUS Reverse Break Fee Insurance
This covers the payment of up to the full amount of a reverse break fee payable by a foreign buyer of a US business (or a non-US domiciled group having a material subsidiary or sensitive business in the US) under an acquisition agreement, in the event the buyer fails to obtain approval from CFIUS for the acquisition.
- Environmental Liability Insurance
A client may have factored expected clean-up costs arising from known pollution incidents into a deal price, but have a concern that these costs may exceed the expected quantum. An insurance policy can be purchased to cover costs in excess of the expected amount, thus capping the financial cost. Environmental insurance can also cover liability to third parties for injury or damage arising from events that may not be covered by existing insurance policies taken out by a business that is being sold or purchased.
- Litigation Buyout Insurance
If a company faces litigation where they have a legal opinion that the likelihood of a successful defence is high but the potential cost if they lose is severe, insurers may agree to take on the risk in return for a premium, thus reducing uncertainty and a potential point of disagreement on valuation and responsibility for the potential liability cost.