Insuring Distressed M&A

We See Distressed Deals Differently

For a long time, insuring distressed assets was relatively scarce. The appetite and understanding behind these risks were simply not there. Our team has been at the front of the industry changing perceptions.

When combining warranty and indemnity (W&I) insurance with contingent risk insurance correctly in the right scenarios, distressed deals can be a win-win for all parties.

Seeing the opportunities others overlook

We support you with a unique mix of people at Miller.

Insurance specialists that were placing transactional policies during the global financial crisis, alongside former restructuring and insolvency lawyers who were prominent at the same time – working at top firms across Europe and Asia.

Together, they can help you take on opportunities others would walk away from.

“Having used the Miller team to broker a number of very difficult insurance solutions on key transactions, we have been impressed by their responsiveness, service and process which has freed my team up to focus on our primary legal service role for our clients.”
Herbert Smith
Their deep market knowledge enables them to achieve fantastic results in tight timeframes.
LDC Group
We’ve worked with a range of brokers in the space – and the Miller team is a clear standout.
Deutsche Bank

Key Factors Insurers Assess

1. How stressed the target business is

The quality of insurance cover comes down to the scope and depth of due diligence and disclosure.
These processes are often rushed in distressed transactions and not held to the same standard as solvent M&A deals.

This is where we use our experience and partnerships with innovative insurers. With upfront, honest advice, we can overcome these challenges and find solutions for you.

2. If warranties are being given – and who by

Insurers will often cover warranties given by management or sellers, even where liability is capped at £1 or $1. A small number of insurers may also cover a pack of synthetic warranties (i.e. warranties given under a W&I policy and agreed jointly between a buyer and the insurer).

This is a big advantage for insolvent transactions where the IP will never usually provide warranties.
Again, because of our experience using different methods with insurers who understand the distressed world, we can design coverage that traditionally wouldn’t be available to you.

3. The level of involvement of the management/seller

Even where the target business is insolvent, insurers can be comfortable if management (whether providing warranties or not) is incentivised enough to complete a robust Q&A process and maintain a sufficiently populated data room.

4. How loss is calculated

Insurers focus closely on how loss is calculated in a distressed scenario. For a solvent transaction, they usually measure loss by a reduction in share value. But that approach often doesn’t work for distressed transactions because the shares may have little to no value to begin with.

Instead, we work with insurers to structure solutions that calculate loss by taking account of the level of debt in the target business and its assets.

How a policy works

How pricing works

What you pay

One-off premium.

How it's calculated

1.4 – 2.5% of the limit of liability taken.
For example – if the limit on the policy is £10m – the premium would be somewhere between £140,000 - £250,000.
These policies are generally priced higher than traditional W&I policies because of the nature of the risk.

Factors that can affect pricing

Sector.
Data room population.
Diligence scope.

How much time we need

Speed and certainty are crucial with these types of deals. Our advice is to speak to us early so we can give you a quick indication on what is and what’s not possible.

WHY MILLER?

Your transactions are complex, time-sensitive and highly demanding. That’s why we choose a partner-led approach where our senior people give you constant support.

And, as a team, we hustle harder than any other M&A broker in the industry.

Find Out More