American private equity funds, as well as non-commercial investors, have been insuring their transactions for some time. According to the ABA (Private Target Mergers & Acquisitions Deal Points Study of the American Bar Association), 60% of all deals will be insured in 2021. The trend from the U.S. has now also established itself worldwide in the midmarket as an alternative to escrow and guarantees. According to the CMS European M&A Study 2022, insurance inquiries increased to such an extent in 2021 that insurers already reached their budgets in Q1. The unbroken rise of these solutions meant that 33% of all transactions with volumes of EUR 25 to 100 million and 47% of all larger sales were insured.
Understanding Your Risks
In the case of company sales, warranties and guarantees are usually provided in the purchase contract or Sales & Purchase Agreements (SPA). Despite all due care, these can be inaccurate. Misjudgments, changing legal norms and interpretations, and inaccurate declarations in the SPA can result in large financial losses for the buyer and/or force the seller to indemnify the buyer (indemnity).
Providing Tailored Solutions
GrECo has been supporting its clients for many years, from classic Warranty & Indemnity (W&I) insurance to special solutions. Our experts are at your side from local to large international transactions. The earlier GrECo is involved in the M&A process, the more tailor-made the coverage concept can be for you. Usually, the insurance is taken out before the closing. In special constellations this is also possible afterwards
Creating Added Value
With M&A insurance solutions, buyers and sellers of (parts of) companies can protect themselves against the consequences of inaccurate promises in the purchase agreement. The insurance covers financial losses both in connection with the purchase of shares (share deal) and the purchase of individual assets (asset deal).
M&A insurance policies are almost invariably taken out by buyers, as they can file their claims directly against the insurance company without having to file them with the seller first.
Advantages for the buyer
Advantages for the seller:
Special forms of M&A insurance
In addition to classic S&I coverage, there are many special solutions for which we provide advice and support. Particularly well established are:
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Oliver Jug
Strategic Sales Manager GrECo International AG
T +43 664 822 27 44