Management Consulting

In a recent case involving a client acquiring companies from a financially distressed group, significant concerns arose regarding the legal implications of asset transfers. The buyer was apprehensive that, following a potential insolvency of the selling group, creditors could challenge these transfers as "transactions at an undervalue," which would leave the buyer with an unsecured claim against an insolvent entity. This situation highlighted the need for a specialized insurance solution to mitigate the associated risks. Aon provided a tailored solution by arranging a contingent risk insurance policy that specifically covered the risk of these transactions being deemed void. This policy ensured that if the transfers were challenged, the buyer could recover the value of the assets that were "clawed back," along with any related costs. To secure this insurance, a legal opinion was required, detailing the factual background, applicable laws, and a quantified assessment of the likelihood of the risk materializing. The implementation of this contingent risk insurance not only facilitated the acquisition process by alleviating the buyer's concerns but also served as a strategic tool in negotiations. By providing financial protection against these defined legal risks, the insurance allowed the buyer to focus on value creation rather than being hindered by potential legal challenges. This case exemplifies how contingent risk insurance can be a vital resource in complex M&A transactions, particularly in distressed contexts.