In recent years, global headwinds and deep uncertainty have frozen activity. But optimism is returning and as rebound activity gathers momentum, the mood is cautiously optimistic. But with this comes risk. Deals move fast and the risks run deep. Expertise matters.
Private equity firms operate in a high stakes environment where managing diverse portfolios carries significant legal, financial, and reputational risks. To thrive, private equity and their portfolios need specialist insurance solutions.
We understand these complex and interconnected exposures across the investment lifecycle - whether it's mitigating buyer’s remorse in M&A deals, understanding pollution and environmental liability threats, defending against breach of warranty claims, improving cybersecurity or managing down director and officer’s risks, our expertise and partnerships matter.
Tim Allen, Head of Global M&A, explains the rebound risks and why more clients are now searching for specialist insurance partnerships throughout the lifecycle.
Tim Allen, Head of Global M&A
The purchase of Directors & Officers (D&O) insurance has grown exponentially over the last 20 years across all industries, for the simple reason that the risks facing directors and officers have also grown. In many industries, the risks that face directors and officers are aligned, centring as they do on accounting risks, malpractice and legal challenges from staff, investors or even customers.
Following the bank of England’s 13th consecutive rate rise, highly UK leveraged companies are further exposed to the effects of higher borrowing costs.
As private equity (PE) firms navigate the lifecycle, they are also juggling a number of potential Directors and Officers (D&O) risks associated with each stage. From formation to disposal, appropriate risk management is essential for PE firms to protect themselves from any potential exposures.
In the second part of our series on the investment liability lifecycle, we look at the exit strategy. Successful private equity investments and exits can hinge on financial performance in the portfolio companies. As an exit approaches, scrutiny intensifies and so the risk of and consequences from dissatisfied parties increases.
Private equity portfolio firms and their directors are involved in a lot more deals than most executives and face a uniquely challenging and exposed role as a result. Their task of sourcing new companies to buy, then sell for an above average return can take years, leaving plenty of opportunity for issues to arise; from minority stakeholders and employees through to poor decision making that can lead to financial claims or even class actions resulting in bankruptcy.
Against the backdrop of high inflation, escalated geopolitical tensions, and high interest rates, many companies decided to postpone their listing plans and wait for a more suitable environment.
Protection against financial losses that buyers or sellers might incur resulting from inaccuracies in representations or warranties made in share or asset sale and purchase agreements or to ring-fence a contingent liability to remove it from the transaction negotiations.
Merger & Acquisition (M&A) insurance has played a key role in helping to facilitate and support foreign direct investment into new jurisdictions and markets, serving as a key component towards market maturation.
AI’s growing data demands are straining digital infrastructure, driving urgent need for more data centres. Investor interest is strong, but risks are high. Success depends on strategic locations – where power is cheap, water plentiful, and regulations are favourable.
Acquiring a company could mean inheriting its cyber risk, making buyers potential targets for cyber criminals. Overlooking cyber security during a company sale can lead to costly consequences, making cyber due diligence a critical part of any deal.
There is a growing divergence in the approach to Environmental, Social, and Governance (ESG) regulations and principles between economic blocs.