Life Insurance Firm Secures $18M Acquisition, Minimizing Risk and Enhancing Cash Flow
A life insurance and retirement solutions company sought Hylant's help to navigate acquiring an $18 million business, using representations and warranties insurance (RWI) to protect against post-sale liabilities, including generational trust entities.
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Challenge
A life insurance and retirement solutions company, part of a highly regulated industry that transactional risk insurers often shy away from, was interested in acquiring a business valued at $18 million. After deal completion, the sellers would exit the business. Part of the sellers' ownership included generational trust entities, which they wanted to shield from post-sale liability.
Because of the nature of the deal, Hylant's client wanted to use representations and warranties insurance (RWI) in the deal to backstop the sellers' obligations.
Solution
Hylant's M&A and Transaction Solutions team leveraged its extensive network of insurers to find just the right one to support this transaction and possible similar transactions in the future. The chosen insurer understood the company's due diligence process and felt comfortable enough on this and future transactions to invest in their acquisition strategy.
Hylant, working with the buyer's inside and outside legal counsel, helped modify the transaction structure to:
- fit the needs of the seller and buyer, alleviating risk from certain trust entities for post-close liabilities;
- customize the insurance policy wording to make it fit for purpose, which limited backstop liability to certain selling entities while isolating entities whose liability would be minimized; and
- deliver an outcome that fit within the financial parameters of the deal.
With RWI in place, the buyer was comfortable finalizing the transaction, and the sellers benefited from reduced escrow financial obligations and increased protection from any breach.
See how Hylant can help you reduce uncertainty, safeguard investments and maximize financial returns during complex transactions.
Results for the Client
Transaction Completed
Both parties comfortable with deal
Improved Cash Flow
Less escrow required to fund backstop, more cash in hand at deal close
Reduced Risk
Up to six years' protection against representations and warranties breaches compared to escrow approach alone
Trusted Advisors
Hylant team members are ready to advise you and help you confidently address your needs.