Know the Risks of Transaction

Mergers and Acquisitions

In most mergers and acquisitions there are economic and strategic goals the buyer has established as reasons for the transaction. These range from simple increases of market share, to the development of new products.  Or entry into new markets or entirely new business segments. With each transaction there are inherent business and financial risks.

To establish a price for the transaction and the architecture of the transaction, the purchasing company performs an initial mergers and acquisitions due diligence effort because understanding the inherent risks and the value of those risks should be a key consideration in the purchase price.

Mergers and acquisitions risk management

CORE’s consultants have been advising on mergers and acquisitions transactions for over 40 years. We’ve assisted both sellers and buyers to enhance their understanding of the business risk, as well as the insurance transfer and the integration of the target into the buyer’s business.

In our experience, even sophisticated risk management departments often struggle with the mergers and acquisitions risk management process and have difficulty documenting the legacy risk issues and navigating the integration process.

Mergers and acquisitions consulting for buyers and sellers

Frequently, buyers engage their insurance agent or broker after the public announcement of the transaction. In our experience, the agent sees their primary role as integrating the target’s insurance program into the buyer’s insurance program by the date of closing. It is true that this is a goal, but it is secondary to understanding and quantifying the exposures to loss and determining the most appropriate method of managing these risks.

For sellers, it is important to understand the risk of loss that is transferred to the buyer and to determine how the retained risks will be managed. Centralized Insurance programs with deductibles, retrospectively rated policies, and programs with self insured retentions can have significant economic risk for sellers.

At CORE, we advise both buyers and sellers on the mergers and acquisitions process, making sure that you understand how the transaction will impact your organization system-wide, and what the implications will be for your total cost of risk.