M&A Risks and Insurance Pitfalls to Avoid
Marsh’s Risk in Context podcast series helps listeners better understand key risks, build more effective insurance programs, and think creatively about risk.
In this episode of Risk in Context, James White, head of U.K. Transaction Advisory at Marsh, chats with Suzanne Jones and Scott Brady, both managing directors in Marsh’s M&A practice, to discuss the significant risks and potential insurance challenges that companies should prepare for ahead of a merger or acquisition.
On the current state of the M&A market:
“Last year was an extraordinary year in terms of mergers and acquisitions. … [This year] we see rising interest rates, which are hampering financing markets. The macroeconomic scene, certainly North America, is more challenged as we look at inflation and other concerns. Global uncertainties [are] impacting valuations. We see … a slowing trend in terms of aggregate activity, yet the deal counts remain high.” — Brady
“In the U.K. and Continental Europe, deal activity is still really strong with absolutely no … signs of slowing. And, in fact, we’re seeing a significant number of sell-side processes just kicking off, which will probably come to market in Q4 or early 2023. … We see no signs on slowing at all.” — Jones
Insurance as part of the M&A process:
“The one thing we’re all trying to prevent is adverse surprises for an acquirer. Anything that might be uncovered and could have been risk-transfered could be a potential P&L hit down the line.” — Brady
“I have seen on recent deals … particularly … for distressed sellers, where they won’t have implemented the … risk improvements that perhaps you would normally expect from companies, so again, really important to look out for any outstanding risk improvements or risk requirements that are required by insurers because that will fall upon the buyer if they haven’t been implemented.” — Jones
On resolving deal issues early:
“Most times, risk and insurance are not going to be deal-breakers as long as you know about them ahead of time. Make sure that you get involved in the M&A process as soon as possible so that you can actually address any issues in either the purchase agreement, the price or the reserve adjustments.” — Jones