Further M&A case studies
Financial Lines
Sale of an outsourcing company
The private equity backer of this business wanted to realise its investment and forced the management team to sell the business
to a trade buyer. The private equity firm refused to give warranties to the buyer but required the management team to give
the warranties. The business was sold for approximately £30m and the buyer insisted that the managers be personally liable
for £500,000 under the warranties, for a period of 7 years. Chubb provided the management warrantors with a sellers’ warranty
and indemnity (W&I) policy, with a policy period to match the life of the warranties they had provided. The warrantors made
the private equity firm pay the premium.
Members’ voluntary liquidation
The shareholders of a holding company appointed liquidators to undertake a members’ voluntary liquidation (MVL) to distribute
the proceeds of a prior disposal to members. The company had sold its main business approximately 18 months earlier. As a
result, the company still had contingent liabilities of up to £8m under the sale agreement for another 4 to 5 years. If a
claim had been made by the distribution of the proceeds/MVL, the joint liquidators could have been held personally liable.
To allow the distribution to proceed, we provided back-to-back cover for the contingent liabilities under the sale agreement
for both holding company and each of the joint liquidators, by way of a bespoke seller/liquidator policy.
Sale of an education group
After the death of the business’s founder, the family decided to sell the group of schools to a trade-buyer. Shares in the
target entity were held by a family trust and the trustees were not prepared to give warranties to the purchaser. The purchaser
insisted on the target’s CEO giving over £6m of warranties; despite him receiving considerably less than this amount as his
share of the proceeds. The CEO was only prepared to agree to the warranties and indemnities if he had protection from a W&I
policy. Chubb provided the CEO with a seller’s W&I policy, with a policy period to match the 7 years of obligations he had
to agree to.
Purchase of an international electronics group
This group was being purchased for over £150m but the seller would only provide around £5m of warranties and indemnities,
for a 12 month period. The buyer wanted a higher value of warranties and indemnities and for a period greater than the 12
months. The buyer lawyer suggested W&I as a solution and contacted Chubb to see what options would be available. Chubb tailored
its cover to provide an additional £10m of protection and to provide this for six additional years beyond the initial 12 months
provided by the seller. This cover protected the purchaser for risks on a worldwide basis.
|
