After a year of extraordinary conditions Gallagher has released its Global Mergers & Acquisitions Outlook Report, January 2021. Following 2019 when M&A insurance capacity expanded significantly to meet increased competition, providers were forced to reassess their positions and adapt rapidly by innovating their offerings to a reduced market. The report covers the key developments likely to influence the future outlook.
After an almost complete halt in mergers and acquisitions with the first lockdown in March last year, almost all M&A activity ground to a halt, leading to the slowest second quarter in decades (in terms of completed deals). But in the next few months the industry started to recalibrate and many suspended transactions were resumed and closed. Activity increased in sectors such as technology and renewables, and opportunities arose in healthcare, pharmaceuticals and fintech that were immune or actually favoured by the pandemic.
In the last quarter private equity deals gathered pace, with increased auction sales. Although there has not been as much distressed M&A activity as expected earlier in the pandemic, this is likely to rise in early 2021, with insurers taking a more nuanced approach to COVID-19 threats by removing or excluding specific warranties.
Overall, while different jurisdictions will rebound at different times, there are cautious signs of optimism as the M&A global market shows signs of significant recovery, and in the interim the scope of cover offered has increased. Coverage for known risks, such as quantified tax and contingent liabilities, has increased and insurers have also started to integrate environmental and title cover, allowing deals to complete more smoothly. For distressed M&A and public to private (P2P) transactions we could see the role of synthetic warranty insurance become crucial for deals where the seller is not present or able to offer warranties, such as during a liquidation.
“While 2020 was an unpredictable period with altered transaction dynamics, we had the flexibility to ensure a market position to align with our clients’ strategy. This included developing new solutions for the market such as synthetic W&I positions, and broadening coverage for tax, title, environmental and contingent liabilities to further roll out in 2021.”
Antony Butcher, National Practice Leader M&A Insurance Services
The past 12 months have been a record year for warranty and indemnity (W&I), and representations and warranty (R&W) notifications, and reduction in capacity is becoming a common theme. At Gallagher we are proud to say that 2020 has been our record year in terms of M&A claims paid out via our placements.
What’s in the report
- Infographics illustrating global trends across global premium and retention rates, global limits and claims statistics
- Articles on tax and contingent liability, M&A insurance outlook and top tips
- Insights on
- Transactional Risk Insurance for distressed M&A and special situations
- Should cover for ‘title to shares’ be purchased in addition to Warranty & Indemnity (W&I) insurance?
- PPP Loan Insurance
- Contingent Risk Insurance: Introductory Report
- Insuring the availability of tax assets
- How COVID-19 has sparked significant innovation
- State of the market report for global M&A insurance
- Are high risk tax items insurable?
- Does the buyer or seller pay for warranty and indemnity insurance?
- IP insurance: can businesses afford to ignore it?
Benefit from our expertise
Access the benefit of our mergers and acquisitions expertise and international resources, as well as a detailed explanation of these market trends, in planning your upcoming deals and transactions. For more information on these market trends, download the full report.
Alternatively contact our Australian expert Antony Butcher, National Practice Leader ‒ M&A Insurance Services, 02 9242 2007.
Gallagher provides insurance, risk management and benefits consulting services for clients in response to both known and unknown risk exposures. When providing analysis and recommendations regarding potential insurance coverage, potential claims and/or operational strategy in response to national emergencies (including health crises), we do so from an insurance and/or risk management perspective, and offer broad information about risk mitigation, loss control strategy and potential claim exposures. We have prepared this commentary and other news alerts for general information purposes only and the material is not intended to be, nor should it be interpreted as, legal or client-specific risk management advice. General insurance descriptions contained herein do not include complete insurance policy definitions, terms and/or conditions, and should not be relied on for coverage interpretation. The information may not include current governmental or insurance developments, is provided without knowledge of the individual recipient’s industry or specific business or coverage circumstances, and in no way reflects or promises to provide insurance coverage outcomes that only insurance carriers’ control.
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