Advisen released a white paper that looks at trends in mergers and acquisitions (M&A) and other commercial transactions, the issues that often impede deals, and insurance solutions to help simplify complex transactions. The free, 5-page paper is sponsored by Allied World Insurance Company.
The M&A market has become more sophisticated and buyers are increasingly cautious as they strive to obtain a sufficient rate of return. In addition to adequate due diligence, factors such as proper target identification and valuation, and effective integration have become vitally important in determining the success of M&A transactions.
These conditions have contributed to an increased reliance on transactional insurance to facilitate M&A negotiations, many of which would not close without such solutions. Transactional insurance is a collection of products offered by insurers that complement the merger and acquisition process by bridging gaps between buyers and sellers that would have otherwise prevented a deal from occurring.
Transactional insurance products like representations & warranties insurance, tax liability insurance, and contingent liability insurance have been available from quite some time, but their use has increased in recent years as the value they bring to M&A deals has become more widely recognized.
While only a small percentage of transactions utilize the products today, it is likely that they will become increasingly commonplace in facilitating M&A transactions in the future.