Management Consulting
Aon
Full Credential Description
In the context of public mergers and acquisitions (M&A), buyers often face significant challenges when attempting to take a public company private, particularly regarding the limitations of warranty protection. Historically, buyers have had to contend with a lack of comprehensive warranty packages due to various seller arguments, such as the assertion that public M&A transactions are inherently less risky due to extensive public disclosures and regulatory scrutiny. Additionally, sellers may struggle to provide comprehensive disclosures, complicating the provision of warranties. To address these challenges, Aon has implemented warranty and indemnity (W&I) insurance policies tailored for take-private and public M&A scenarios. This innovative approach allows buyers to secure a warranty protection package akin to what is typically available in private buy-out deals. Aon has successfully advised on various transaction structures, including mandatory general offers triggered by sale and purchase agreements (SPAs), voluntary general offers to shareholders, and court-appointed schemes of arrangement. In these scenarios, Aon ensures that buyers receive comprehensive protection, even when sell-side warrantors limit their liability to their respective sale proportions. Key to the implementation of W&I insurance in public M&A is the flexibility in policy structuring. Aon has developed W&I policy programs that can adapt to uncertain future investment scenarios, allowing for adjustments based on the eventual outcomes of transactions. This flexibility ensures that buyers do not have to accept uncertainty in policy parameters. Furthermore, Aon effectively manages the disclosure and diligence processes, ensuring that underwriters receive the necessary quality of information to optimize coverage outcomes. Aon has also addressed situations where no party is willing to provide warranties by structuring policies that include 'synthetic' warranties. These warranties are drafted into the W&I policy for insurance coverage purposes, even if they are not provided by any transaction party. While the appetite for synthetic W&I policies is limited and often more expensive, Aon prioritizes engaging with the sell-side to identify suitable warrantors for conventional W&I policies. The implementation of W&I insurance has proven to be an effective tool for contractual protection in take-private transactions, with increasing usage in Asia. When executed correctly, W&I insurance not only enhances investor confidence in take-private opportunities but also provides sellers with the ability to unlock diverse transaction opportunities by offering buyers the assurance of recourse against a reputable insurance company. This comprehensive suite of warranties significantly improves the attractiveness of public listed businesses for potential investors.