Challenge

A private equity firm secured $18 million in financing to complete a $37 million acquisition, with 62% of the deal funded through debt. As a condition of the loan, the lender required key person life insurance coverage equal to the full loan amount.

Initially, the requirement applied to both the firm’s Co-Founder/Managing Partner and the acquired company’s CEO. However, the CEO’s age—73—made coverage prohibitively expensive, adding more than $750,000 in premium costs and putting pressure on the transaction’s financial viability.

At the same time, underwriting for the Co-Founder/Managing Partner revealed nicotine use, triggering a significant increase in premium and further complicating the economics of the deal.

Solution

Hylant worked closely with the client to reassess lender requirements and identify practical alternatives. Our team facilitated discussions with the lending institution and successfully removed the requirement to insure the acquired company’s CEO, eliminating a major cost driver.

During underwriting, we identified an issue in how nicotine use was disclosed in the application. Our team worked directly with underwriters to clarify the information and ensure it was evaluated appropriately.

To further control costs, Hylant pivoted to a carrier with more favorable underwriting criteria for nicotine-related disclosures. This approach allowed the client to secure the required coverage without unnecessary premium increases.

Key person insurance is often required in financed transactions, but how it is structured and priced can materially impact deal economics. Hylant helps clients align coverage requirements with real risk, control costs, and protect transaction value.