Key risk and insurance considerations for M&A transactions

Airmic and Aon have jointly published a new guide for risk and insurance professionals highlighting the key elements to be considered when organisations negotiate and engage in mergers and acquisitions (M&A).

Titled ‘Risk and Insurance in Mergers and Acquisitions’, the guide provides guidance on the types of deals organisations undertake. It outlines the key risk, insurance and human capital factors risk professionals  should consider, together with the insurance solutions that are available to support a transaction.

The guide is released at Airmic Fest,  Airmic’s first virtual conference of its kind. The conference this year has the theme of ‘Working together in a time of accelerated change,’ and takes place between the 22nd and 24th of September.    

‘Risk and Insurance in Mergers and Acquisitions’ sets out the stages involved in mergers and acquisitions and provides guidance on risk management and the role insurance can play. It also takes the reader through the various stages of insurance and risk due diligence.

The guide considers:

• The different types of mergers - whether an initial public offering (IPO), a public share deal, or an acquisition via the purchase of shares or assets.
• The information-gathering part of the M&A process, which is important to both the buyer and seller and can help to avoid future value reductions in the acquired usiness.
• The significance of a comprehensive due diligence process to help the buyer make informed decisions regarding the risk exposures attached to a target business.
• Transaction risk insurance solutions, which can be used to enhance the position of the buyer or seller or used to overcome potential issues with deal negotiations.
• The guide reflects the insurance and legal practices of the UK, however, many of the principles will apply to other countries and territories, too.

Click here to read the guide.

Julia Graham, Deputy CEO and Technical Director of Airmic, explained:

“Mergers and acquisitions can boost growth and release opportunity, but the  importance of assessing risk and undertaking comprehensive due diligence for M&A transactions can never be underestimated.  

“It is essential that these considerations occur at the earliest stage within a transaction and engage relevant stakeholders across an organisation – it is an enterprise risk management activity. This excellent guide highlights the types of deals organisations undertake and will help our members to consider the principal risks, insurance and human capital considerations needed to complete M&A transactions successfully.”

Alistair Lester, CEO of Aon’s M&A and Transaction Solutions in EMEA, added:

“The role of risk advisory and contingent capital solutions in securing investments and enhancing returns is already embedded in a significant proportion of M&A transactions.

“In the last few quarters, we have seen an expansion in both the scope of solutions deployed, and the range of organisations adopting these solutions. Solutions are evolving from ‘traditional’ diligence and W&I solutions into Tax, Structured Credit and Intellectual Property. The range of users is also growing from largely PE buyers to increasing participation of national and multinational companies. Combined, these two trends provide the risk management community to add significant value to our organisations in an M&A context.”

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About Airmic

The leading UK association for everyone who has a responsibility for risk management and insurance for their organisation, Airmic has over 450 corporate members and more than 1,300 individual members. Individual members include company secretaries, finance directors, internal auditors, as well as risk and insurance professionals from all sectors. Airmic supports members through training and research; sharing information; a diverse programme of events; encouraging good practice; and lobbying on subjects that directly affect our members. Above all, we provide a platform for professionals to stay in touch, to communicate with each other and to share ideas and information.

About Aon

Aon plc (NYSE:AON) is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance.

With more than 120 colleagues, an engagement on more than 850 transactions and structuring transaction insurances on more than 330 deals in 2019, Aon’s M&A and Transaction Solutions is a leading provider of specialist due diligence services to the Private Equity, Infrastructure and M&A industry. Its capabilities extend across a broad suite of services from Risk & Insurance, Human Capital, Cyber Security, and Intellectual Property. Clients also benefit from its expertise as the largest and most innovative structurer of transaction Insurance instruments in EMEA including Warranty & Indemnity, Tax, Litigation, Credit and Surety solutions.

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