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Transactional Risk

Transactional risk insurance helps protect you from merger and acquisition (M&A) deal risks, whether you are a buyer or a seller. Marsh can help you assess your deal risks, optimise your coverage and risk management strategies, and minimise impacts to your bottom line.
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Strategic buyers, private equity firms, and deal participants constantly face a variety of challenges and risks during merger, acquisition, divestiture, and other business transactions.

Closing any deal always involves a margin of risk, and having insurance as a layer of protection can be a smart strategic move to protect your business.

Our dedicated specialists have deep experience, with backgrounds in M&A, corporate law, taxation, investment banking, and accounting. They understand the critical, changing dynamics parties face before, during, and after a transaction.

Trends indicate that the demand for transactional risk insurance is rising as global M&A value continues to increase. With key relationships with leading transactional risk insurers worldwide, our specialists work with international team members to coordinate your coverage globally. Our dedicated claims teams and resources also can help navigate any transactional risk claim process on your behalf.

We provide solutions to help you understand, quantify, and mitigate risks in your M&A activity. This allows you to increase deal value, maximise returns, and bridge gaps in deal structure.

FAQs

As a business, risk preparation is always key. However, even with optimal planning, there’s always room for disruption in a steady workflow. Taking steps to minimise disruptive risk is critical to the success of a transaction, particularly when it comes to completing sensitive mergers and acquisitions.

Strategic buyers, private equity firms, and deal participants, especially across borders, need to keep transactional risk top of mind while closing deals. Common instances of transactional risks that can impact M&A activities include:

  • Foreign exchange deals: Cross-border transactions create economic exposure and high volatility.
  • Commodity: Fluctuation in prices impact all parties involved.
  • Interest rates: Fluctuation of interest rates can also impact transactional value.
  • Counterparty obligations: Relying on a partner in a business transaction always comes with a level of risk if contractual agreements cannot be met.
  • Timeliness: Market condition changes can impact the time it takes for a transaction to finalise.

Tax treatments taken by buyers and sellers within M&A activities can also make it difficult to manage transactional risk, as can fraudulent conveyance.

Strong due diligence, coupled with insurance designed specifically for transactional risk, can help facilitate your deal.

Transactional risk insurance provides coverage for strategic buyers, private equity firms, and deal participants involved in mergers and acquisitions. It typically includes representation and warranties insurance or warranty and indemnity insurance, tax liability insurance, contingent legal risk insurance, and environmental liability insurance.

Insurance coverage for transactional risk allows parties in a merger or acquisition to transfer many of their risks to an insurance provider and away from their balance sheet. This allows companies to allocate them away from the transaction itself and eliminates the need for special indemnities or purchase price reductions.

Tax insurance is an example of a customised solution which can cover unknown tax issues, with each policy having a discrete “insured tax treatment,” or known exposure, that a company wishes to insure.

We help companies determine what kind of risks are involved in making transactions across a large scale, whether it involves foreign currency exposure, interest rates, or other determining factors that could impact the end deal.

Monitoring such risks on a regular basis makes it easier to measure their potential impact when a transaction is in the works. This should go hand-in-hand with proper due diligence and an appropriate insurance program.

Global leadership

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Craig Schioppo

Global Head, Transactional Risk

  • United States

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Contact us to get in touch with an industry or risk subject matter expert, learn more about a specific solution or submit a sales/RFP inquiry.

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