Achieving a Clean Exit Through The Use Of Mergers and Acquisitions Insurance

Transaction

A US corporate making a circa GBP76 million acquisition of a UK based manufacturing business in the automotive sector.

Issue

The target had become distressed and a consortium of banks undertook a debt for equity swap. Due to the buoyancy of the sector the business recovered well and the banks appointed an advisor to run a sale process. Prior to beginning the process, a trade buyer made an approach but stated it would require a high level of warranty recourse. This was something that the banks were unwilling to give.

Solution

The seller offered to fund a buyer-side warranty and indemnity (W&I), policy up to the full transaction value that sat excess of a small management cap. Marsh arranged a policy with terms and conditions that the buyer was comfortable with, allowing the board of the buyer to sign off the acquisition.