Mergers & Acquisitions and Tax
Ironshore is a leader in Mergers and Acquisitions Insurance. In fact, our team closes more than 300 deals a year. Our experienced underwriters average nearly a decade of experience each, are fluent in a wide array of languages and all were practicing lawyers or accountants prior to joining our group. From Representations and Warranties Insurance to Tax Liability Insurance and unique, customized policies, our team has earned a reputation for executing multiple transactions with attention to detail and within the time constraints required.
Ironshore has a dedicated M&A Claims team with private practice and Lloyd’s market experience who specialize in dealing with complex M&A claims. This team works closely with our team of underwriters from contract inception, so they are well-versed on all the details of the agreement. In the event of a claim, our entire team works together to ensure a timely and considered response. There is a great deal at stake with any M&A deal. Working with the premier insurance team in the industry helps reduce the risks for all parties involved.
M&A Insurance is an ever more valuable tool to facilitate M&A transactions. This specialist area of insurance includes products and solutions such as Representations and Warranties Insurance (for buyers or sellers), Tax Liability Insurance and one-off, unique policies created for individual risks.
We offer leading insurance solutions with the ability to write over $100 million and a dedicated claims team working with you throughout the entire process.
Representations and Warranties Insurance
The prevalence of private equity has helped fuel large numbers of acquisitions and disposals over recent years, and this activity appears set to grow as clients continue to acquire businesses in an uncertain global economic environment.
During this tough economic climate and with international buyers looking to do business in less familiar jurisdictions, parties in transactions have become much more risk averse. Buyers often insist on greater liability caps and placement of consideration in escrow. Buyers are also more concerned about the financial covenants of certain sellers. Many sellers wish to utilize sale proceeds to repay loans or investors, but find it difficult when they have significant representations and warranties obligations.
Virtually all private sales of businesses require sellers to provide representations and warranties to purchasers. Often these representations and warranties create a seven-year obligation. But what if you wanted to spend or re-invest the proceeds of your sale, but risked a claim from the purchaser during the next seven years? What if you were to sell-up, retire and were later faced with litigation from an aggressive purchaser of your business?
Insurance can provide a comprehensive solution. For a one-off premium, clients can purchase Representations & Warranties Insurance policies with significant benefits, including a policy period of up to seven years, defense costs coverage and settlement protection. If clients are faced with a warranty claim, defense costs and settlement protection could be exactly what your clients need. R&W Insurance can remove a large amount of risk and uncertainty from a transaction.
On the buyer side of the transaction, there may be different concerns. What if the warrantors default on payments? Could the purchaser make a successful recovery? What if the warrantors will only accept a relatively low cap on their liability compared to the amount that the purchaser paid for the business? (This is common when a private equity investor is selling and refuses to give warranties.) Or what if the seller is undergoing financial restructuring?
M&A lawyers frequently recommend R&W Insurance to their clients. We have broad representations and warranties experience, having provided coverage to hundreds of clients over the years across a variety of business sectors.
R&W Insurance can be used in many situations:
- To enable parties to release or utilize their sale proceeds
- To break a deal deadlock
- To bridge a gap in expectations between parties on risk allocation
- To allow the parties to “get comfortable” with their negotiated position
- To satisfy lenders
Tax legislation complexities and tax issues can arise during due diligence in M&A transactions. It is often a contentious point as to whether the buyer or the seller should bear the potential tax liability. Our tax insurance product minimizes financial exposure to tax liabilities and related concerns, which helps reduce the friction and time required to complete transactions.
Our offering benefits each party’s vested interest. For a seller, tax liability insurance has the added advantage that no funds need be placed in an escrow account. For private equity sellers, once a tax liability is insured, it should not restrict their ability to distribute proceeds to investors. If there are multiple sellers, tax insurance should also help limit each of the sellers’ exposure to one another. For a buyer, obtaining insurance on a tax risk can provide greater comfort to its lenders or simply provide the buyer with peace of mind resulting from the superior covenant strength of Lloyd’s and Ironshore. Our policy also provides protection against the very real legacy risk associated with back taxes.
Ironshore’s team of dedicated tax underwriters have more than 30 years’ experience advising on corporate tax transactions, making us the most experienced team in the tax liability insurance market. Our tax team has advised on the tax aspects of all types of corporate transactions, including M&A, reorganizations, returns of proceeds, real estate, corporate finance, cross-border structuring, private equity and venture capital. Our team brings this wealth of experience, together with a sharp commercial focus, to diligently assess and underwrite your tax liability as efficiently as possible.
Dedicated Claims Team
Ironshore has a dedicated M&A Claims team with private practice and Lloyd’s market experience who specialize in dealing with complex M&A claims. This team works closely with our team of underwriters from contract inception, so they are well-versed on all the details of the agreement. In the event of a claim, our entire team works together to ensure a timely and considered response. While this paradigm seems obvious, it’s unique in our industry. It’s no wonder that 90% of our clients gave us a high rating for claims service this past year.
Representations & Warranties: Over $100 million
Tax Insurance: $55 Million
Ironshore Team Differentiators
Ironshore's Global Mergers & Acqusitions and Tax teams' experience covers hundreds of M&A transactions in a variety of jurisdictions and industries. To learn more, please see our marketing materials below.