Cyber Security, Transactional Risks, Multinational Expansions
Among Top Three Concerns
WHITEHOUSE STATION, N.J.,
Jan. 18, 2018 /CNW/ -- A new Chubb
whitepaper, "Emerging Risk Considerations in Global M&A
Transactions," singles out cyber security, transactional risks and
multinational expansions as the three key financial exposures
inherent in merger and acquisition transactions and offers
suggestions on how to mitigate them.
"The M&A environment is evolving at a rapid pace and, as a
result, private equity dealmakers are constantly facing growing
financial exposures, including cyber security, transactional risks
and multinational expansions," said Seth
Gillston, Chubb's M&A and Private Equity practice
leader. "While one size does not fit all, the use of a specialized
risk transfer mechanism to deal with these and other risks is
essential to ensuring transactions proceed with greater clarity and
confidence."
Gillston coauthored the whitepaper with Steven Goldman and Michael Tanenbaum, both Executive Vice
Presidents of Chubb's Financial Lines division.
Cyber Security Risks
According to Osterman Research,
2016 was the worst year on record for cyber attacks, with nearly
half of all businesses surveyed held captive by ransomware
incidents alone.
"Forensic analysis of a target acquisition's cyber risk may no
longer provide a credible assessment in determining a company's
exposure after a deal closes," said Tanenbaum. "One way to mitigate
the risk is to seek cyber insurance coverage from a carrier, such
as Chubb, that specializes in M&A transactions, and also offers
loss mitigation services as part of their cyber program. Working
with a knowledgeable broker is also crucial in identifying the
right solutions and partners to help customize these types of risk
transfer strategies."
Transactional Risks
Purchase and sale agreements
contain a significant number of representations and warranties made
by the parties involved. It is imperative that the parties consider
the best way to protect themselves against financial losses that
may be incurred as a result of certain breaches of representations
and warranties contained in the agreement. In order to effectively
address this risk and streamline the process, a representations and
warranties insurance policy should be considered.
"This risk transfer strategy helps protect buyers and sellers
against financial exposures related to the underlying transaction,"
said Goldman. "The representations and warranties insurance policy
is a great alternative risk management tool compared to escrow
accounts or other traditional indemnification structures, because
of its flexibility. Such a policy also streamlines the negotiation
process and reduces deal friction that is often inherent in
transactions."
Multinational Expansion Risks
Companies that operate
across international boundaries already face a set of special
challenges and opportunities. In today's highly uncertain
geopolitical climate, transactional activities involving
multinational entities are subject to rapidly evolving regulatory,
legal and compliance issues.
"From a due diligence standpoint, sifting through a
multinational company's insurance portfolio to address the risk of
unforeseen liabilities and insurance coverage gaps can be very
difficult," said Gillston. "Using a Controlled Master Policy as a
risk transfer strategy can help companies involved in a transaction
reduce exposures by pairing a master policy, issued in the U.S.,
with locally issued coverage. This provides consistency across
operations, and can help solve for inadequacies of an entity's
insurance portfolio."
To learn more about what risks to consider in a global M&A
transaction, click here.
About Chubb
Chubb is the world's largest publicly
traded property and casualty insurance company and the largest
commercial insurer in the United
States. With operations in 54 countries, Chubb provides
commercial and personal property and casualty insurance, personal
accident and supplemental health insurance, reinsurance and life
insurance to a diverse group of clients. As an underwriting
company, we assess, assume and manage risk with insight and
discipline. We service and pay our claims fairly and promptly. The
company is also defined by its extensive product and service
offerings, broad distribution capabilities, exceptional financial
strength and local operations globally. Parent company Chubb
Limited is listed on the New York Stock Exchange (NYSE: CB) and is
a component of the S&P 500 index. Chubb maintains executive
offices in Zurich, New York, London, and other locations, and employs
approximately 31,000 people worldwide. Additional information can
be found at: chubb.com.
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SOURCE Chubb