Mergers & Acquisitions can be stressful and time consuming and unfortunately, insurance and risk management tend to be an afterthought. Getting your broker involved early in the process can eliminate much risk and uncertainty from your transaction. The Mergers & Acquisitions team at Sisk & Co. can help you every step of the way with your M&A activities. In fact, we can often provide solutions that help the sale close faster.
Prior to Execution of PSA
It is critical that we become actively involved in this stage of the transaction. We provide recommendations on structuring the insurance and indemnity language to help abate the assumption of any future liabilities of the acquiring company. This includes, but is not limited to the following:
- Creating a clear understanding of who will be responsible for property or liability claims prior to the acquisition.
- A requirement that the acquiring company approve any renewals or changes to insurance during the period prior to closing.
- A requirement that the company to be acquired keep all insurance policies in force until notified by the acquiring company.
Review of PSA Draft(s) – While many companies obligated to agree to what we would consider unreasonable insurance and indemnity language just to get the deal closed, they may not fully understand the potential liabilities. We provide a comprehensive overview of any potential liabilities, as well as ways to mitigate them. Often times there are insurance products available that can significantly decrease, if not totally eliminate the need for certain indemnities and escrows, especially on the environmental side.
Additionally, language providing the acquiring company the benefit of the acquired company’s insurance proceeds for claims based on occurrences prior to closing.
Insurance Policy Reviews – We provide a thorough review and analysis of the company’s current insurance program. This will give the acquiring company an understanding of any past or current gaps in coverage they may be walking into.
Claims Reviews – We provide a detailed analysis of the company’s loss history, including trends and patterns that can help predict future losses. As part of this review, we also review any open claims to determine if the reserves appear realistic, and confirm if the coverage and limits are sufficient to cover them.
Environmental Liability Analysis – Based on the liabilities assumed in the PSA and review of any environmental assessments, we provide our clients an accurate picture of potential environmental liabilities, as well as recommend risk management strategies, including the use of commercial insurance, to mitigate them.
Safety Audit – We perform a review of the company to be acquired’ s safety manual and practices, and when possible, even do onsite visits. This will provide you a comprehensive understanding of the safety culture of the new company.
Workers’ Comp Experience Modifier Integration – The effect on the Experience Modifier varies based on how the sale is structured. For example, if one firm acquires a second, the modifier of the acquiring firm will apply to the combined operations. However, if two entities are merged into a new entity, the modifiers of both entities will be taken into consideration when calculating the new mod. It is very important to understand how your mod will change, as it can have a considerable increase on premiums if the company to be acquired has less than stellar losses.
Employee Benefit Review – We complete a comprehensive review of the employee benefit package, including benefit enrollment materials, summary plan descriptions and benefit overviews, plan documents, required notices and benefit administration process and practices. Our team assists the client in the alignment of the benefit design to match prior benefits and address specific benefit requirements. At this time, a complete review of the client’s claims experience and utilization factors takes place. This provides detailed information on the programs cost structure and begins the benefit strategy process.