Mergers & Acquistions Private Equity and Corporate Acquistions Practice

Lockton's Private Equity and Corporate Acquisitions Practice (PECAP®) provides deal-related insurance and employee benefit due diligence to acquisition-minded clients. We exist to serve our client-base and the private equity community. We have the expertise and experience to identify and evaluate unrecognized exposures and their impact on the purchase price of any merger or acquisition. We also quantify costs associated with these exposures for the purpose of factoring them into the final structure of the transaction.

We provide pre-closing value by evaluating factors that will affect the purchase price.

Our post-closing value is provided by our M&A team who is with you through your exit strategy. We consistently emphasize management of expenses, such as claims dollars, and improve EBITDA by managing these costs over the life of the investment. Lower expense leads to a higher EBITDA which, in turn, leads to a higher return on multiple.

Scope of Services

By conducting a comprehensive due diligence review covering all facets of a target company’s insurance, benefits and risk management programs, we are able to recommend options and strategies that lead to substantial savings and other long term financial benefits. 

Our services include a review of three critical areas: 
Financial Analysis

• Investigate the cost of risk and its impact on earnings.
• Develop payout patterns for open claims obligations to understand post-closing cash management requirements.
• Conduct claim reserve analysis to assess collateral and balance sheet requirements.
• Coordinate with accountants on financial statement issues related to insurance and benefits expenses.
• Develop insurance solutions for deal-related obstacles:
  1. Reps and Warranties / Tax Opinion Liability
  2. Loss portfolio transfer
  3. Loss mitigation
  4. Environmental programs

Transaction Analysis

• Analyze the purchase agreement from an insurance and benefits perspective:
  1. Evaluate, quantify and define pre-closing liabilities.
  2. Ensure that the assumption of liabilities is clearly stated and reflects the decisions reached between buyer and seller.
  3. Verify that, post-closing, there is an available asset to offset any assumed pre-closing liabilities.
• Review the insurance provisions and offer solutions.
• Review historical purchase agreements to understand the assumption of liabilities from acquisitions or divestitures and their effects on post-closing insurance costs.
• Understand insurance and indemnity provisions in company contracts to evaluate the extent of liabilities assumed under these agreements.
• Determine the impact of changes in control on the current insurance and benefits contracts.
• Meet lender insurance requirements by providing relevant insurance documentation necessary to close.

Insurance/Benefits and Risk Management Review

• Conduct a thorough coverage review to identify coverage gaps and/or restrictions.
• Research historical carrier(s) solvency.
• Determine existence of aggregate or limit breaches that could lead to unfunded obligations on a post-closing basis.
• Analyze historical loss patterns to develop accurate loss projections.
• Provide post-closing budget along with a suggested program design for property/casualty as well as employee benefits plans or other needs.
• Review the adequacy of loss prevention and workplace safety programs.

For more information, please click on the link below.

PECAP (2009)

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