American private equity funds, as well as non-commercial investors, have been insuring their transactions for some time. The trend from the U.S. has now also established itself worldwide in the midmarket as an alternative to escrow and guarantees. The general trend indicates that there has been a significant increase in insurance inquiries for mergers and acquisitions, leading to a situation where insurers have met their budgets earlier in the year. This reflects a growing reliance on insurance solutions for transactions, which has become a common practice in the industry.
With M&A insurance solutions, buyers, and sellers of (parts of) companies can protect themselves against the consequences of inaccurate promises in their purchase agreement. GrECo has the experience and expertise to analyse your situation, identify potential liabilities, and provide you with the best coverage options for your transaction.
GrECo prides itself in understanding its clients’ risks and providing solutions to mitigate them. With regards to company sales, we know that warranties and guarantees are usually provided in the purchase contract or Sales & Purchase Agreements (SPA), and that, despite all due care, these can be inaccurate. Misjudgements, 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).
This is where GrECo comes to the fore. We can assist you in negotiating and drafting these agreements, as well as in managing any claims that may arise from them. We will analyse and identify these risks for you and aid you in creating comprehensive and unique insurance solutions.
GrECo has been supporting its clients for many years, from providing classic Warranty & Indemnity (W&I) insurance to unique solutions tailored to individual needs. Usually, the insurance is taken out before the closing. In special circumstances., this is also possible afterwards.
Every company in the M&A process has a specific set of characteristics and needs, which we carefully consider while crafting the best insurance solution. Our experts are by your side every step of the way whether you are conducting local or large international transactions. And the earlier you involve us in the M&A process, the more bespoke your coverage concept can be.
Our M&A 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, because they can file their claims directly against the insurance company without having to file them with the seller first.
M&A insurance policies offer multiple advantages for the buyer from fully insurable financial losses, and acceptance of a lower seller’s contractual liability, which increases the attractiveness of the bidder’s offer, to insurance cover in the event of intent on the part of the seller, and usually a higher credit rating of the insurer than that of the seller.
Advantages for the seller are also significant and include a higher probability of success or completion, clean exit/availability of capital – no provisions, and no recourse of the insurer in case of damage (except in case of intent, malice).
In addition to classic S&I coverage, there are many special solutions for which we provide advice and support. Particularly well established are:
- Title Insurance to cover risks related to the ownership of the object of purchase (especially in real estate transactions),
- Tax Indemnity Insurance to protect identified tax risks,
- Litigation buyout insurance for smouldering legal disputes,
- Environmental Insurance to cover environmental risks (e.g. due to contaminated sites).
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Oliver Jug
Manager International Clients
GrECo International AG
T +43 664 822 27 44