Mergers & Acquisitions Insurance

Ensure all your risks are covered

All relationships are built on a foundation of trust, but in any business deal is likely to have certain aspects you're unsure about. It’s vital that both sides protect their interests.

Our specialists at Howden are experts in corporate and tax law, investment banking and insurance, and can create a bespoke solution to help your deals get over the line.

Comprehensive warranty and indemnity cover can be used in place of escrow funds so that proceeds are distributed to your investors quickly.

Your cover should encompass the following, with various aspects dialled up or down depending on what's right for your business:

  • Warranty and indemnity
  • Tax risks
  • Real estate and share risks
  • Contingent risks
  • Environmental risks

How we work

To create market interest, we think of your project as an "I.R.O" (Initial Risk Offering)

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Working with clients/legal advisors to identify key risks

We carry out a forensic analysis of the documents and conduct thorough due diligence.

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Designing your I.R.O to be attractive to the market

Presenting the key risks clearly, concisely and attractively as possible, we generate competition in the market for you

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Proven track record in large M&A claims

We have an integrated approach to claims, combining our specialist legal, tax and financial sector expertise

Warranties and Indemnities

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Warranty and Indemnity

Provides financial cover for the unknown risks associated with breaching warranties or, a claim under the tax covenant set out in the underlying acquisition agreement. 

A powerful deal tool to streamline negotiations between the parties, W&I can allow the seller to limit its liability to a low level, while also giving the buyers their desired protection. Known, identified risks, transfer pricing, secondary tax liabilities and pensions underfunding are key exclusions in W&I policy. 


Who is it for? 
The buyer or seller. The seller will often introduce insurance to the deal but, in 9 out of 10 deals, the buyer is the policyholder. A buyer-side policy affords the buyer more control and comfort; they can claim directly from the insurer, with no need to involve the seller. The insurer will waive subrogation rights against the seller (barring seller fraud, of course).


Timeframe
We can go from initial discussion to having a tailor-made policy in place for you within 17 days. 

Policy periods typically match or, in the case of a buyer-side policy, extend the time limitations set out in the acquisition agreement. The policy period is generally 18-36 months for general warranties and seven years for title, capacity and tax.

Premium
Typically 0.75-1.3% of the policy limit for real estate transactions and 1-2% for operational businesses - depends on factors including jurisdiction of the acquisition agreement, nature and location of the target's operations and policy parameters. 
 

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Tax Risks

Tax risks

A cost-effective replacement or enhancement to a traditional seller indemnity/escrow and a valuable tool during mergers and acquisitions when neither party is willing or able to retain an identified tax risk 

Cover in respect of corporation tax, income tax, capital gains tax, stamp duty land tax and VAT. Covering an identified tax risk crystallising into an actual liability (including any number of jurisdictions required). 

The policy covers

  • A successful tax assessment from a tax authority in respect of an identified tax risk
  • Associated costs including legal costs, interest and penalties 

Who is it for?
Buyer or target company. Typically held by the buyer, but will also cover any claims made against the target company.

Timeframe 
From initial consultation, we can get you covered within 2 – 3 weeks. Generally matches the relevant statute of limitations, up to a maximum of 10 years.

Premium
Premium rates are typically 3-8% of the estimated tax liability. Considers factors including nature of the tax risk, likelihood of a challenge and strength of technical defences. 

Title risks

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Title to shares and real estate risks

Ready to protect against a range of real estate and title risks.

Title to real estate 
Covers a challenge to legal title of the property including mortgage fraud, boundary issues, sellers' misrepresentation and incapacity of prior owners. Can also include identified issues including restrictive covenants, chancel repair liability, rights to light and missing searches. 

Title to Shares 
Covers a challenge to legal title to the shares/units including beneficial ownership, sellers' incapacity and defective documents.

Who is it for?
The owner, a buyer, a lender or financing institution/bank. Designed to protect any entity with an interest in the underlying assets, often including successors in title.

Time period
The policy period will often survive duration of ownership, but can often be assigned to future buyers or successors in title.

Premium
Typically 0.1%-0.2% of the policy limit.
 

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Contingent risks

Contingent risk

Protection in the event a known risk crystallises. 

Covers legal defence costs and settlement following an adverse ruling or event, replaces or enhances a traditional seller indemnity/escrow. Available for wide variety of risks e.g. on-going litigation, contractual disputes or alleged IP infringement.

Who is it for?
Buyer, target or defendant. Typically held by the buyer, but can also be used to protect against on-going litigation outside the transaction context.

Policy time period
Match the underlying risk period, up to a maximum of 10 years.

Premium
Premium rates are typically 4-10% of the estimated liability/ policy limit. Depends on factors including nature of the risk/dispute, stage of proceedings and recoverability of costs. 

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Environmental risks

Environmental risks

Covers financial losses from pre-existing or new pollution events (can be extended to known risks). Costs covered include remediation/clean-up costs and legal defence costs/settlement of third-party claims. 

Who is it for?
Buyer or target company. Typically held by the target company, especially those with on-going operational environmental risk.

Policy time period
Typically, 1-10 years for unknown risks and 2 years for known risks. Clients tend to buy 2-5 year policies.  

Premium
Premium rates are typically 0.5-3% of the policy limit. Depends on the nature of the target's operations and underlying risk. Known pollution events command a higher premium. 

Got all your risk bases covered?

Speak to a specialist advisor today

Contact us today

Call our team  on +372 6 144 400 or drop us a quick message and we'll get back to you as soon as possible.

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