How to Close Difficult Deals Using M&A Insurance Products

As a deal maker, we need many tools in our kit to bridge the gaps between buyers and sellers. The price is only the first hurdle, and agreement on that may be complicated by the terms of the sale.  In fact, there's an expression in our business "You tell me the price, and I'll tell you the terms."  A subset of terms involves risk management for both parties, and disagreement on elements of that can kill a deal.

I am on the conference planning committee for the June, 2010 M&A Source Conference in Orlando, and wrote the following description of a workshop to be conducted for approximately 150 M&A intermediaries from across the country (and some international).  I have lined up a dynamic attorney/instructor from AON Risk Services to talk about using insurance tools to meet both parties' need for risk mitigation in M&A transactions.

How to Close Difficult Deals Using M&A Insurance Products

The allocation of risk between buyer and seller is one of the myriad ways deal negotiations can fall through, and is often the fulcrum for deal success or failure. In today’s economic climate, acquirers are even more risk averse and getting to the close may be even more challenging. Buyers want to hold sellers responsible for post closing claims or liabilities and financial statement authenticity, whereas sellers want to create as much certainty and finality about their consideration as possible. This struggle is typically over legal mechanisms like representations and warranties, indemnifications, holdbacks and baskets.

Insurance mechanisms to address representations & warranties, tax indemnities and other transaction related issues may provide the tools needed to manage both parties’ needs for risk mitigation – and save the deal. This workshop is derived from a series of Continuing Legal Education lectures, but tailored for The M&A Source:

• Insurance products available in merger and acquisition transactions
• Case studies on buyer/seller representations and warranties insurance, tax insurance, litigation buyouts and contingent liabilities
• Considerations in negotiating a transactional insurance policy