As in any transaction, negotiations for a merger or acquisition transaction often can break down over disagreements among the parties as to which party will bear the financial risks for certain identified or potential risks. While negotiating parties have historically utilized tools such as escrows, indemnity caps and purchase price adjustments to allocate risk, these tools, can often be inflexible, inefficient or inadequate for the purposes of one party. This may be due to differing risk appetites, different perceptions of the level of risk associated with certain actual or potential exposures or the simple unfamiliarity of the purchaser or merger partner with the legal, political or regulatory environment in the target’s jurisdiction.
In today’s environment with potential acquirers or merger partners being more risk adverse, deal points preventing the completion of a merger or acquisition arise more frequently. With the ability to provide creative insurance solutions tailored to specific transactions and the client’s specific needs, Ambridge’s Transactional Insurance can serve to bridge the gap among the negotiating parties as to the allocation of certain financial exposures, the quality of protection provided if any such exposures crystallize, and the amount of protection required to satisfy the perception of the potential maximum risk that a buyer or merger partner is prepared to assume.