ACE USA, the U.S.-based retail operating division of the ACE Group, today announced the availability of a new podcast exploring mergers and acquisitions (M&A) and related insurance considerations. The presentation provides dealmakers with factors to consider in the risk-identification process as they develop a coordinated approach to manage the potential risks and liabilities that can be inherited in a merger, acquisition, or divestiture.
“M&A Risk Management: Avoiding Pitfalls, Finding Solutions.”
Podcast: Play in new window | Download (Duration: 18:06 — 18.0MB)
In this new ACE podcast, Seth Gillston, Senior Vice President of ACE Financial Solutions, is joined by Scott Meyer, Executive Vice President of ACE Professional Risk, and William P. Hazelton, Executive Vice President, ACE Environmental Risk, as they discuss a report authored by Mr. Gillston, with contributions from ACE product specialists, titled, “M&A Risk Management: Avoiding Pitfalls, Finding Solutions.” Their commentary is part of ACE Progress ReportsSM, a collection of white papers, articles, and executive reports on current and emerging risk management issues. (Speaker biographies are below.)
In their podcast discussion, Mr. Gillston, Mr. Meyer and Mr. Hazelton examine mergers and related insurance considerations, by outlining the questions dealmakers might consider prior to closing an M&A transaction to help identify potential liabilities. One area of discussion is environmental and directors’ and officers’ liability and key coverage concerns as they relate to M&A deals. They further comment on the critical functions of mergers and acquisitions and the importance of working with an informed insurance carrier that is equipped to handle unique challenges as they emerge. Finally, the team discusses the insurance implications of the post-closing process and takes dealmakers through a post-closing analysis of the transaction.
Commenting on the insurance products and risk management solutions available in the market for mergers and acquisitions activity deals, Mr. Gillston said, “Acquirers or sellers may want to consider obtaining retroactive limits of liability in order to bolster the financial protection offered by the target company’s insurance policies. Another insurance consideration is including a loss portfolio transfer (LPT), which is a retroactive insurance program transferring uncertain future payment obligations, related to past known liabilities from discontinued business or current operations to the specialized M&A insurer. In addition, they may consider representations and warranties insurance, designed to indemnify the acquirer when the seller’s representations and warranties prove inaccurate down the line. Finally, tax indemnity insurance is available, which can be used to indemnify the insured for uncertain tax consequences related to the target company, including the tax treatment for the M&A transaction itself.”
Mr. Hazelton discussed the increasingly strict federal environmental regulations and their potential for increased environmental liability exposures in an M&A transaction, “The acquiring company may inherit the target’s pollution exposures. This could mean going back through many decades of operations, including the target company’s previous mergers and acquisitions. Or, a company may find itself straddled with associated retroactive liability as the result of previously unregulated practices. In either case, these successor liabilities challenge even the most thorough due diligence. They present the risk of tremendous financial liabilities and could actually derail the party’s expectations on both sides of the deal.”
Mr. Meyer commented on the most important consideration for executives of a company during an M&A transaction, “Directors and officers of the target company will need to become protected under the acquiring company’s coverage. The acquirer policy is needed to provide coverage for forward-moving acts in their capacity as executives of the acquirer.”
To access the ACE Progress Report referenced in the podcast, please visit: http://www.acegroup.com/us-en/news-room/progress-reports.aspx. The material presented in both the podcast and the report is not intended to provide legal or other expert advice. It is presented as information only. Listeners and readers should consult legal counsel or other experts, as applicable, with any questions they may have.
ACE USA is the U.S.-based retail operating division of the ACE Group, and is rated A+ (Superior) by A.M. Best Company and AA- (Very Strong) by Standard & Poor’s. ACE USA, through its underwriting companies, provides insurance products and services throughout the U.S. Additional information on ACE USA and its products and services can be found at www.aceusa.com. The ACE Group is a global leader in insurance and reinsurance serving a diverse group of clients. Headed by ACE Limited (NYSE:ACE), a component of the S&P 500 stock index, the ACE Group conducts its business on a worldwide basis with operating subsidiaries in more than 50 countries. Additional information can be found at: www.acegroup.com.
Seth Gillston serves as Senior Vice President of ACE Financial Solutions and leads ACE USA’s Merger’s & Acquisitions Industry Practice, which consists of a deal team of specialized product and service experts who concentrate on both private equity groups and strategic mergers and acquisitions. Based in New York City, Seth has more than 15 years of experience in the insurance industry, and joined ACE Financial Solutions in 2000. Prior to his tenure with ACE, Seth spent five years at American International Group (AIG), serving in a variety of underwriting and marketing positions. He received his Bachelor of Science degree with a dual major in Risk Management and Economics from Temple University in Philadelphia.
William P. Hazelton is Executive Vice President of ACE Environmental Risk, which is the U.S.-based retail environmental operations of the ACE Group. Based in New York City, Mr. Hazelton has national responsibility for the development, underwriting, and delivery of environmental risk solutions for retail brokers and their clients, from small or mid-sized companies to large multinational firms. In this capacity, Bill is managing a national team of environmental underwriting specialists deployed throughout the U.S. With more than 20 years of underwriting and claim management experience in the environmental insurance arena, Mr. Hazelton joined ACE USA in 2005. He is a graduate of James Madison University, and holds a Bachelor of Science degree in both political science and history. He holds a Master of Arts degree in history from Rutgers, the state University of New Jersey. Mr. Hazelton is a frequent presenter at environmental industry and legal conferences, and has published papers on environmental exposures and solutions.
Scott Meyer is Executive Vice President of ACE Professional Risk. With more than 20 years of underwriting and risk management experience in the professional lines insurance arena, Mr. Meyer joined ACE USA in 2008. He previously held several senior leadership positions at AIG, most recently serving as President of the Financial Institutions Group, Head of the Mergers & Acquisitions Insurance Group, and as Senior Vice President, leading the company’s Strategic Risk Group. He previously co-founded a Managing General Agent specializing in transactional risk management products. From 1997 to 2000, Scott served as a Director in the Financial Services Group at Aon. He is a graduate of New York University, and holds a Bachelor of Science degree in economics.
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