For some, an exit from your business might be imminent and for others it may feel a million miles away – for now, you’re laser focused on growth and scale. No matter where you are in the lifecycle of your business, it’s always worth exploring your future plans with your risk adviser.
How to prepare for a merger or acquisition?
A business owner should prepare for a sale from all sides – a head to toe health check on the business if you like. This should include the basics such as ensuring that the business is financially performing to maximise value, that your internal management structures are working to grow the business, through to client contracts and leases, etc. are all up to date. Taking a detailed approach will provide the best possible viewpoint of your business to any potential acquirer and therefore protects the enterprise value.
The same can be said from an insurance perspective. Ensuring that the business has all necessary policies, warranties and indemnities, D&O (directors’ and officers’ insurance) where required, keyperson and shareholder protection in place, could protect the value of a transaction and avoid presenting an opportunity for the acquirer to chip away at the enterprise value.
What protection measures should you consider for a successful sale or acquisition?
Here are our top 5 tips:
Insurance due diligence
Conduct a proper pre-acquisition insurance due diligence services report on the suitability of the prospect’s insurance and risk management programme. This should highlight any gaps, overlaps or structural issues in cover or risk management approach that could have a material impact on the investment, whilst outlining possible remedies and their impact on cost.
Credit risk consultancy
Credit risk consultancy ensures all aspects of credit insurance are considered during the M&A process – such as reviewing the impact of a transaction on the prospect’s debt position and risk profile in the eyes of credit insurers and reviewing any trade credit insurance in place. Improving or clarifying your risk profile to lenders and insurers before, or soon after, completion can prevent significant disruption to supplier and customer relationships.
Key person / business protection
The success of many acquisitions relies on the continued performance of management and key individuals, so much so that insurance protection is often a funding requirement. Whether it be key person, shareholder protection or relevant life policies, we offer solutions that protect the key individuals and their families in a tax efficient way.
Warranty and indemnity (W&I)
W&I policies cater for unforeseen liabilities arising from a breach of the warranties under a sale and purchase agreement. This has become an increasingly valuable deal enabling tool for both buyers and sellers, enhancing bids through lower indemnity caps as well as facilitating clean exits for sellers.
People are your greatest asset – that’s why you should provide an environment that maximises workplace satisfaction, wellbeing and performance. An effective employee benefits programme will do just that. We’ll work with you to design, communicate and implement a reward and wellbeing package that will attract and retain talented people, ensuring the continuation of a happy, motivated and successful workforce.
Considering a sales, merger or acquisition?
Our dedicated M&A advisory team has collectively acted on over 150 buyouts, disposals, listings, and mergers and is well placed to support the wider corporate finance and investment community. Connect with the team.