M&A osiguranje
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This document provides information about ANV Global Services Ltd., a specialty insurance company focused on M&A insurance solutions. It discusses ANV's history, operations in multiple countries, and financial ratings. The document then summarizes what a Warranties & Indemnities (W&I) insurance policy covers for buyers and sellers in M&A deals. It also outlines the underwriting process, required documentation, pricing factors, and recent CEE/CIS deals that ANV has worked on. The document concludes with an overview of the global M&A insurance market and contact information.
M&A osiguranje
- 1. Insert Title Image Here PROPIETARY & CONFIDENTIAL M&A INSURANCE SOLUTIONS FOR THE CEE/CIS MARKETPLACE Budapest, 14 April 2015 Dr. Thomas M. Mannsdorfer – Underwriting Director | M&A Insurance ANV Global Services Ltd., Spanish Branch
- 2. PROPIETARY & CONFIDENTIAL ANV – WHO WE ARE Key figures: • Founded in 2010 by R. Matthew Fairfield • Main investor: Ontario Teachers‘ Pension Plan, one of the 20 largest pension funds in the world (assets under management of ca. USD 130 billions) • Acquisition of three Syndicates at Lloyd‘s (1861, 5820, 779) in combination with strong organic growth • Experienced senior management team ANV overview: • Focus on speciality and niche insurance products • Branches in Barcelona, London, Hong Kong, New Jersey, Kansas City and Rio de Janeiro • Over 250 employees • Gross written premium ca. EUR 700m • S&P financial rating: A+ (Lloyd‘s) • Risk bearing entities: ANV Syndicates (1861, 5820, 779) • The MGU has a strong focus on local retail markets (in particular Continental Europe, Asia and Latin America) 2
- 3. PROPIETARY & CONFIDENTIAL WHAT IS A W&I INSURANCE 3 Warranties & indemnities insurance or reps & warranties insurance (W&I insurance) can be structured as a seller- or buyer-side policy which covers losses arising from a breach of warranty or claims under an indemnity. W&I insurance covers risks that are unknown at inception of the policy. A buyer-side W&I insurance covers all loss suffered by the buyer arising from a breach of sellers’ warranty or, in certain cases, under an indemnity (first party loss insurance). A seller-side W&I insurance grants cover for sums that the seller is obligated to pay as a result of a warranty or indemnity claim made by the buyer under the SPA, due to a breach of warranty or to a third party claim (third party liability insurance). The W&I insurance includes coverage for reasonable costs related to the prevention, mitigation, investigation, defence or settlement of any covered claim.
- 4. PROPIETARY & CONFIDENTIAL KEY ADVANTAGES 4 Seller seeks: Buyer seeks: • Clean exit Liability coverage for warranty/indemnity claims and loss payments • First-party coverage Direct claim against the insurer for loss suffered resulting from a breach of warranty or indemnity • Full proceeds available Sale proceeds may immediately be distributed to sellers, mainly PE • An excellent debtor W&I insurers generally have a good rating, “A” or higher • An alternative securitization Replacing or reducing the need for an escrow, bank guarantee, deferred price or loan notes with subsequent costs reduction • No insolvency risks In particular, when the seller is a PE fund to be dissolved after the sale or is a distressed company • A more attractive target “Dress up your bride” • A more attractive bid “Sugar your bid” Seller and Buyer seek (alignment of interest): • to speed up closing of the deal • to break up potential deadlocks (bridging gaps in negotiations) • not to burden their commercial relationship with possible warranty claims
- 5. PROPIETARY & CONFIDENTIAL HOW IS THE UNDERWRITING PROCESS RUNNED 5 Transaction Underwriting NBI 1 SigningContractual negotiations Due diligence Closing Phase I: 48 hours Phase II: 5 - 8 days (including external legal review) UW Call 2 Submission Insurance Policy (from signing) 1 Non-Binding Indication: transaction documents are roughly analyzed and a non-binding quotation is provided with a tentative coverage spreadsheet. 2 Underwriting Call: conference call where the main issues arisen from the thorough review of the transaction documents are discussed by the proposed insured, ANV and their respective advisors. Insurance Policy (from closing) Drafting of the policy
- 6. PROPIETARY & CONFIDENTIAL REQUIRED DOCUMENTATION 6 Phase I Transaction summary and insurance requirements Draft of sale and purchase agreement (SPA) Information memorandum Latest annual accounts Phase II Final draft or execution version of the SPA Vendor’s due diligence (if available) Buyer’s due diligence Full data room access Underwriting Process
- 7. PROPIETARY & CONFIDENTIAL PRICING OF STANDARD W&I INSURANCE • Low policy excess/retention (≤ 1% of consideration) • Tipping retention/basket • Broad definition of “Loss” • Incomplete or only internal due diligence is available • Low sum insured (application of minimum premium) • Certain countries (i.e., USA, Russia, mainland China) and “riskier” industry sectors • High policy excess/retention or underlying escrow • Balanced SPA with adequate qualifications (to materiality and seller‘s knowledge) • Narrow definition of “Loss” • Short duration of contract • High quality of due diligence (renown external experts) • Extensive disclosure process FactorsthatincreasepremiumFactorsthatincreasepremium FactorsthatdecreasepremiumFactorsthatdecreasepremium Premium is generally between 1-2% of the insured limit of liability, depending on the following factors: 7
- 8. PROPIETARY & CONFIDENTIAL W&I INSURANCE IN CEE/CIS – RECENT DEALS 8 Project Belgrade: Buyer-side W&I Insurance for a group of companies active in south-eastern Europe in the non-alcoholic beverage and dairy industry, sold by the liquidators of the Holding companies (Dutch entities). Key challenges of this deal were the wide array of contingent issues that had to be identified and dealt with in a separate way (known issues are not covered by W&I insurance) as well as the complex corporate structure of the group that extended to different south-eastern European jurisdictions. Further, pending antitrust issues. Project Office Building: Property deal for an office building in Budapest. Buyer-side, with the client being a global real estate private equity. Problems with lack of DD on chain of ownership, and interpretation of new Hungarian Civil Code in that respect. In the end we bound the policy for Project Office Building, with a reduced limit of liability (EUR9m) and no coverage for the warranties relating to title. First Title, a specialist title insurer, offered the title insurance policy for the full purchase price. All parties were happy with the final outcome.
- 9. PROPIETARY & CONFIDENTIAL W&I INSURANCE IN CEE/CIS – RECENT DEALS 9 Project Lei: Buyer-side W&I insurance for a Hungarian investor in the energy sector that acquired a majority of shares of a limited liability company in Romania, which owns and operates run-off-the-river micro- hydro power plants in Romania. The sellers were two private companies of which neither was willing to provide a seller cap of significance. Some of the major issues in our risk assessment included the fact that the target company had only non-audited financial accounts (as no audit was required by the applicable Romanian financial legislation for this type of legal entity), some specifications around the target properties were unclear and on-going, identified litigation had to be excluded from coverage. Project Ruby: Seller-side W&I insurance for a real estate fund for a business park in Łódź (property) that has been acquired by the seller from another investment fund in 1999. There were several issues related to the environmental exposure as well as to a broad array of missing documents, governmental approvals and permits. Remote risk of reclaim as well as structural damage due to former mining activities.
- 10. PROPIETARY & CONFIDENTIAL CLAIMS: ANV PHILOSOPHY 10 Fundamental objective to honour all valid claims swiftly and fairly. Close work between underwriters and claims team to ensure the intention and response of the policy is clearly understood. Professional claims handling service focused on a proactive, efficient and straight forward approach. Relevant parties well informed, with on-going dialogue as claim progresses. Each claim handled on an individual basis by a specialist adjuster, offering a personal and tailored claims experience. Claims process supported by utilising the latest technology, allowing a speedy distribution of information and accurate recording of data.
- 11. LOSS RESPONSE MAP – BUYER SIDE W&I-INSURANCE
- 12. PROPIETARY & CONFIDENTIAL MARKET OVERVIEW EMEA ASIA PACIFIC AMERICAS TOTAL Limits of insurance (USD millions) 6,858 2,575 3,360 12,793 Number of transactional risk policies 313 130 185 628 Private equity policies (% of policies) 56% 42% 56% 53% Corporate policies (% of policies) 44% 58% 44% 47% Buyer-side W&I policies (% of policies) 88% 63% 78% 80% Seller-side W&I policies (% of policies) 12% 37% 22% 20% As the left chart illustrates, limits of insurance placed globally have increased by 155% since 2010 The average transaction limit size is about USD 20m 80% buyer-side and 20% seller-side policies The insured has been 53% of the cases a private equity company and 47% of the cases a corporate As is the case in certain niche M&A markets, such as the Nordics and Australasia, it is expected that M&A insurance will continue to grow in Europe, the Americas and further afield. Within Europe, M&A insurance is most commonly used in Germany, UK and the Nordic regions, though an uptick is being seen in France, Italy, Spain and Eastern Europe US companies’ growing interest in M&A insurance also mirrors their growing crossborder activity. Conversely, there is a growing number of institutional investors in Europe now looking to sell companies 1 2
- 13. PROPIETARY & CONFIDENTIAL ANV CONTACTS ANV M&A Insurance www.anv.eu.com | m&[email protected] Thomas M. Mannsdorfer Underwriting Director +34 93 545 9025 +34 674 178 840 [email protected] Alex Christians Underwriting Manager +44 207 280 6123 +44 758 703 4838 [email protected] Luc Joordens Underwriter +34 93 545 9024 +34 662 448 187 [email protected] Marta Batalla Underwriter +34 93 545 9020 +34 680 265 043 [email protected] Paul Hutchins Underwriter +44 207280 6124 +44 746 914 6212 [email protected] Alicia Sánchez Underwriter +34 93 548 4925 +34 667 539096 [email protected] 1 3