Mergers
& Acquisitions

Protecting your next business move.

Mergers and Acquisitions are business transactions through which two companies can join forces to fulfil their strategic goals. Such business decisions enhance competitiveness, but their complexity requires a systematic and diligent approach at all stages of the agreement.

NAK Katsiberis has the expertise to provide such insurance solutions, that shield businesses against risks that may arise when planning their next steps.

M&A Insurance covers losses arising from breaches of warranties and claims, under the Sale and Purchase Agreement.

WHY CHOOSE M&A INSURANCE?

This insurance solution is beneficial for both parties and necessary; Even if the procedure is supported by professional advisors, there is always an underlying risk of overlooking crucial matters during the due diligence and disclosure process.

This insurance policy can protect either the buyer or the seller:

– The seller is protected against losses resulting from claims made by the buyer for breaches of warranties or claims.

– The buyer is shielded from financial losses resulting from breaches of the warranties and tax indemnities.

TYPES OF M&A INSURANCE

1

Warranty & Indemnity
.

Warranties provided under the sale and purchase agreement, usually are the outcome of exhausting negotiations. Given the time pressure, the risk of overlooking certain matters is high and this can lead to potential claims.

Warranty and indemnity insurance provides cover from unknown risks, related to the breach of warranties or claims related to tax indemnities at the stage of the sale and purchase agreement.

The biggest advantage a buyer’s policy provides is that it enables the insured to claim directly from the insurer without having to pursue the seller first. As for a seller’s policy, the insured is shielded from severe consequences that misinterpretations and omissions have.

The policy period is ranging between two to three years for general warranties and seven years for title, and capacity.

2

Title
.

This insurance solution covers a wide range of risks and there are two types:

Α) Title to Shares:
This option covers a challenge to legal title to the shares -including beneficial ownership- sellers’ insolvency and defective documents.

Β) Title to Real estate:
It covers challenges over the legal title to property, including mortgage fraud, boundary issues, misrepresentation by sellers and incapacity of previous owners.

3

Tax Liability
.

A recognized tax issue may be the reason of cancelling an agreement. This insurance solution addresses these concerns by providing coverage for a range of issues. Some of them are company tax, income tax, capital gains tax, stamp duty and VAT.

The duration of the insurance policy matches the relevant statute of limitations and up to ten years.

4

Contingent Risks
.

Buyers and sellers could assess differently a known risk and its potential financial repercussions. Contingent risks solution covers legal defense and settlement costs after an event or an adverse ruling.

The duration of the insurance policy is equivalent to the underlying risk, up to ten years.

5

Environmental Risks
.

Environmental l risks are a general concern in a large portion of mergers and acquisitions. This insurance solution covers financial losses that may arise from pre- existing or new pollution events. Coverage includes restoration/cleanup costs, as well as legal defense costs.

The duration of the insurance policy is usually three to five years, based on regulations.

BUYERS’ ADVANTAGES

Both, the buyer and the seller, can benefit from an M & A Insurance Policy.

01

Allows the buyer to make a claim related to breaches of warranties and tax indemnities from the insurer and not the seller.

02

Removes the need to take action against the seller, protecting future business relationships between the two parties.

03

Offers protection when buying an insolvent business, or when the business was acquired by the seller recently. In these cases, the seller cannot or will not offer warranties.

04

Reassures shareholders, investors and other stakeholders, by limiting the risk of not completing the deal.

05

Eases concerns regarding the seller’s financial status and ensures that indemnities will be paid.

06

May supersede actions arising from breaches of warranties against executives temporarily remaining in management.

07

Extends the warranty period and limit.

SELLERS’ ADVANTAGES

01

Facilitates disinvestment while allowing sale proceeds distribution to investors.

02

Bridges the gaps in the negotiation process, for a series of issues that may arise (duration, method of payment, guarantees).

03

Helps to avoid the long-term obligations arising from the provision of guarantees.

04

Allows for a higher sale price in an auction as the risk is transferred to the insurance company.

05

Prepares “cleaner” goals for auctions.

In partnership with an experienced insurance broker, both parties can protect their agreement from day one (due diligence) to its completion. Identifying and mitigating the risks through specialized insurance solutions is a crucial step to closing the deal in the agreed timeframe, without any surprises.

COST

The cost depends on a number of factors, which are unique to each deal, such as the industry and the amount of transaction.

Our experienced team can offer specialized insurance solutions that meet your business’s insurance needs

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