Mergers and Acquisitions

Specialist M&A insurance products and services

Mergers & acquisitions (M&A) in the UK accounted for £90.4 billion1 of investment in 2011, making it one of the largest and consistently dynamic components of our economy. While inward and domestic acquisitions were slightly down on the previous year, outward acquisitions by UK businesses investing overseas were the highest since 20072.

The economic climate may temper the appetite for such investments but it can never stop them. Whether it’s a multi-billion pound deal that spans borders or a local acquisition at SME level, M&A are complex transactions with many moving parts. Risk of failure is ever-present; as the old saying goes, there’s many a slip twixt cup and lip. That’s why it makes sense to work with an expert insurance broking partner who can help you protect the right parts of the deal with the right insurance.

Welcome to Oval Insurance Broking - Transaction products and services that help protect your deal

Oval Insurance Broking (Oval) is one of the UK’s leading specialist insurance brokers. With an expert, nationwide capability, we offer a range of insurance products and services to professional M&A advisors that come with a two-fold function. Not only can we help overcome the obstacles to investment or exit processes, we also have the insurance expertise that can add value to a business in a given M&A situation.

Our specialist M&A insurance products and services include:

Warranty and Indemnity Insurance

These policies indemnify vending warrantors, or the buyer and are typically useful:

  • Where the selling warrantors want to re-invest the proceeds - or retire and want to avoid residual contingent liabilities.
  • As an alternative to an escrow retention where the buyer is concerned about seller security.
  • Where warranties are only available from a management team with a small shareholding and the warranty cap is insufficient to meet buyer demands.
  • Where the selling shareholders cannot agree who should provide warranties.

Directors & Officers (D&O) / Public Offering Insurance

Unlike most other forms of corporate insurance, D&O Liability policies can be transaction sensitive, meaning any change in the controlling interest in the company is likely to eliminate cover automatically for the new board. D&O policies usually also exclude cover for any public offering of securities and other forms of significant fundraising. Where companies are seeking first-time admission to a stock market, a Public Offering of Securities policy offers wider cover than is available under general D&O policies. It also provides a six-year policy term to match exposures under London Stock Exchange regulations.

Retrospective Liability Insurance

This can be deployed where there is an actual or contingent uninsured liability that is causing an obstacle to a corporate valuation, investment or sale. A typical policy structure will indemnify the original exposed party (target company or seller) under a policy that - if necessary - can be assigned to a subsequent buyer. The policy can follow the retention/assumption of liabilities in a sale and purchase agreement or vice-versa. The insurance market has great appetite for personal injury or product liability exposures but in reality, any issue can be considered.

Opinion Based Liability Insurance

Most commonly used in relation to tax, where there is doubt over ultimate tax liabilities. For example, a given professional opinion may be that eventual tax liability will be £1 million - but tax authorities could take an alternative view causing the liability to rise to £2 million. Opinion Based Liability transfers the £1 million downside risk to an insurer for a fixed premium. It can also be applied to a wide variety of situations where there is a likely outcome, but a known risk of a less favourable outcome.

Environmental Liability Insurance

You can insure first party remediation costs and liabilities in a variety of ways. Policy terms of 10 years or more are widely available and policies are assignable to future buyers. This type of M&A insurance is most useful where there are concerns over the environmental condition of an industrial site, or you’re looking for a tool to enhance the value of a brown-field site. Where insurance is thought to be a possible answer, it’s usually best to consider options before conducting any site investigation, because when contamination is found, it’s no longer possible to insure the discovery.

Complementary financial expertise that adds value

Oval Financial Services, is the financial advisory business of the Oval group. Oval Financial Services advisors are able to help you with a range of corporate/personal investment products and services, that are often directly relevant to the M&A transactions. These include:

  • Directors’ Remuneration Strategy: an in-depth review of how directors’ income is structured to mitigate tax wherever possible and increase net reward.
  • Exit Strategy: putting a structure in place to ensure that on eventual sale of shareholdings, all reliefs are used fully and maximum capital is extracted from the business in the most tax efficient way.
  • Share Protection Insurance: in the event of the death or incapacity of a key director, shareholder or partner, this ensures the remaining directors, shareholders or partners will have sufficient funds to acquire the shareholding and prevent a forced sale - or even a takeover from a competitor.
  • Keyman Protection: compensates a business for financial loss on the death or critical illness of a key employee.
  • Corporate Pension Review: ensures the company pension schemes are invested correctly in terms of charges, risk profile and the overall objectives for the scheme members.
  • Employee Benefits: offering full integration, design, TUPE transfers and benefits harmonisation for people across the business.

About Oval Insurance Broking

With offices across the UK, Oval Insurance Broking (Oval) is the specialist insurance and risk management partner of choice for thousands of organisations and individuals across a range of disciplines and industry sectors.

From general insurance to sector-specific requirements, the strength of Oval lies in designing bespoke, dynamic and keenly competitive risk solutions that fit your needs exactly. Our skilled specialists take the time to understand those needs, simplifying risk to deliver a consistently innovative, high standard and high performance service, that adds value, capability, agility and a competitive edge to your business.

Would you like to talk?

If you would like to know more, please contact David Wood, Head of Professions on 0117 300 6161 or email: david.wood@theovalgroup.com

1-2 Office for National Statistics Statistical Bulletin Mergers and Acquisitions involving UK Companies Q1-Q4 2011, published 2012

Mergers and Acquisitions
Brochure

For more information, please download our Mergers and Acquisitions Brochure. Click here