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Uptake of M&A insurance increases as businesses face more complex risks, says new report

A new report, Leaving nothing on the table: Unlocking off-radar transaction value, released by professional services firm Aon, has found that new approaches to identifying, quantifying and hedging transaction risks are emerging and the uptake of M&A insurance across Europe, the Middle East and Africa (EMEA) has increased significantly as risks associated with transactions become more complex.

The report, produced in partnership with Longitude, a Financial Times company, finds that the number of M&A transactions insured via Aon in EMEA has more than tripled since 2014, rising from 83 to 316, a trend which is even more exaggerated in the North American market where Aon placed M&A insurance for over 650 transactions in 2018. Deal value of these transactions has also increased, particularly amongst private equity (PE) and corporate buyers, where there has been an increase in EMEA of more than 300 per cent since 2014, with average value now USD270 million.
The increase in M&A insurance uptake is linked to disruptive forces such as technology and digitalisation, environmental and political change, and the rise of new business models; these forces are complicating the deal landscape by creating new operational threats and strategic risks. The report also finds that growing awareness of insurance as a cost-effective hedging tool is increasing its appeal to acquirers and use as a solution for certain transaction risks.
Alistair Lester, CEO of Aon’s M&A and Transaction Solutions in EMEA, says: “Digital disruption has driven a shift in business value from the tangible to the intangible. In a transaction context, this disruption is throwing up major considerations for acquirers when evaluating target companies, including future growth potential and operational risks they will be subject to. Almost all deals will face impact from the pace of technological change and this particularly comes to bear on cyber and intellectual property due diligence.”
Edwin Charnaud, Chairman of Aon’s M&A and Transaction Solutions in EMEA, adds: “Businesses are facing more complex risks than ever before, and thus the value of M&A insurance has arguably never been greater. Given that the risk landscape is evolving so quickly, adapting the due diligence process and finding new solutions to mitigate this expanding universe of risks is critical to create a competitive edge, protect against unforeseen pitfalls, and ultimately unlock transaction value. We fully expect the increased uptake of M&A insurance to continue.”

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