Almost every business goes through a merger or acquisition at some point in their lifespan. No matter how careful you are with your due diligence every deal has its surprises. If you are considering selling your business or buying a business there are some insurance implications to consider.
As a buyer you will likely be assuming responsibility for past actions of the company you buy. They may have produced defective products or services in the past that result in injury or damage on your watch, or maybe just an allegation of such. Getting and retaining historical records of their insurance policies can enable you to access the insurance in force at the time to cover the liability and legal defence expenses.
As a seller you may need to purchase an extended reporting period for your claims made liability policy to protect yourself from any claims that happened prior to the closing date of your sale but were not reported until after the deal is done.
The legal agreement between buyer and seller generally require the seller to indemnify the buyer for breaches of their representations and warranties. This provides challenges for the seller tying up capital in escrow, and for the buyer with uncertain ability to collect if a breach occurs.
Merger and Acquisition Insurance protects buyers and sellers from the financial losses that may result. It can resolve potential disagreements between the parties before they create irreconcilable differences that may even kill the deal.
If you are considering buying or selling a business, talk to your broker