Mergers and Acquisitions

Warranty & Indemnity (W&I) insurance is a tailored product from AIG Europe’s M&A team which covers either the buyer or the seller for loss arising from breach of the warranties and indemnities given in an acquisition agreement (SPA).

Sellers can obtain a clean exit by using W&I insurance to ensure that the sale proceeds can be returned to investors and avoid the need of an escrow account.

Buyers can procure warranty protection on transactions where the seller is reluctant to give warranties or where there is doubt over the seller’s ability to satisfy a claim.

Market

Any company considering a merger or acquisition.

Tax Liability Insurance from AIG can reduce or eliminate a loss arising from the successful challenge by a tax authority of a taxpayer’s position.  Potential tax risks are typically identified during due diligence pursuant to a potential acquisition of a company and may have lied dormant within a target for many years.

A buyer may have to proceed with a transaction or investment where there is uncertainty in the application of tax law or inadequate time to obtain an advance tax ruling. The risk for the buyer is that the tax position of the target could be challenged by a tax authority, which could lead to a material reassessment of their liability to tax and could include interest, fines and penalties. Similar issues could arise where a group is rationalising its or its targets corporate structure either pre or post an M&A transaction.

Market

Any company considering a merger, acquisition or restructuring with an identified tax issue.

Litigation Buyout Insurance (LBI) is a tailored insurance product from AIG Europe’s M&A team that quarantines a client from the uncertainties inherent in outstanding litigation whether those uncertainties relate to the outcome or to the eventual amount of damages awarded. LBI will either cap an insured’s financial exposure or remove it altogether and will be designed to meet the particular needs of the insured and the specific characteristics of the dispute.

LBI enables clients to ring-fence liabilities which may arise from any current or anticipated litigation, arbitration or other dispute. This may be particular useful in an M&A context where an unresolved dispute would otherwise prevent an acquisition proceeding or would have a significant impact on the purchase price. An LBI policy can transform the inherently uncertain liability of litigation into a quantifiable insurance cost which can enable the parties to the transaction to focus on the business being acquired.

Underwriting and cover are tailored to each case, allowing the policy to be adapted to a dispute, regardless of its subject matter. As such, LBI can be adapted to cover proceedings ranging from a simple breach of a supply contract, a more complicated employment issue through to highly complex securities litigation and intellectual property disputes.

Market

Any company considering a merger or acquisition or companies with large, identified contingent liabilities.

Through our partnership with Shariah-compliant managing general agent Cobalt Underwriting, we offer a range of market-leading Islamic insurance solutions for M&A transactions. Whether insuring the buy or sell side, we work with clients to understand, measure and mitigate transactional risks, helping to reduce uncertainty and close deals quickly.

Whether a requirement from your finance provider or a key part of your investment criteria, we provide Sharia-compliant M&A insurance policies, reviewed and certified by a certified Shariah scholar in consultation with their Shariah supervisory board.

We offer three main Islamic M&A products, with limits of up to US$30 million per policy available:

W&I Insurance

• This tailored coverage helps protect buyers and sellers from financial losses if misrepresentations or inaccuracies in representations or warranties occur. Buyers can distinguish bids, sellers can reduce indemnity obligations – and both can close more efficiently.

Contingent Liability Insurance

• Helps reduce or eliminate exposures relating to the business of the seller or buyer arising out of a merger or acquisition, thereby enabling deals to close more quickly – and sales proceeds to avoid impairment.

Tax Liability Insurance

• This cover helps reduce or eliminate financial losses arising from a tax authority’s successful challenge of your tax treatment during a transaction, which could lead to a material reassessment of your tax liability and include fines and penalties.

These products are issued by AIG, having been approved as Shariah-compliant by Cobalt.