Mergers and acquisitions in the global insurance industry carry their share of unique challenges. There is always the potential for increased regulation, and ever-changing technologies and infrastructures can make it expensive and difficult for companies to keep pace. When it comes to cross-border M&A, cultural integration is often overlooked. These factors make the world of M&A in the insurance sector complicated to navigate.
Key Drivers of M&A in the Insurance Industry
M&A activity in the global insurance sector becomes more dynamic as a result of several contributing factors and strategic objectives.
Due Diligence
As with all M&A transactions, meticulous due diligence in the insurance industry is critical to a successful deal. While many due diligence topics for an insurance company overlap with that of all types of M&A transactions (property, tax records, employee issues, etc.), the insurance industry is subject to some unique scrutiny, such as:
Crafting of the purchase agreement in insurance M&A transactions is also an important part of the process. If done correctly, it will address both the unique nature of insurance companies and the regulatory environment in which they operate.
Insurance-Specific Indemnities
Indemnification provisions within insurance M&A agreements are similar to that of other industries, with exception of a few differences. An M&A transaction can call for unlimited indemnity protection for specific circumstances in which the buyer asks the seller to assume the risk. Common areas for specific indemnities include:
Cultural Integration in M&A
Global insurance executives have reported that overcoming cultural and organizational differences following a deal has been a significant challenge.
In order for cross-border M&A to be successful, leaders must look beyond financial motivations and consider how cultural integration can result in improved synergy and innovation. This can happen in several ways:
The route a company chooses to take depends on the size of the two companies, the post-deal organizational structure, and the advantages generated by different cultural traits.
When companies carefully take culture into account, they can greatly benefit from the positive outcomes and lower the risk of failure in M&A. A cultural assessment should be conducted alongside due diligence far before the deal nears completion. This assessment should study the geographic locations, management styles, work habits, and attitudes of both companies. Successfully uniting employees from diverse backgrounds calls for a customized process that should not be rushed and includes clear and honest communication.
Steps for Success
When insurance companies are considering M&A for financial growth, geographic expansion, and bolstered competitiveness, there are certain steps that leadership should take to find the right type of deal and ensure a positive outcome.
Contact Us
If you are ready to grow your company, sell your company, find a new investment opportunity, or plan your exit strategy for retirement, give us a call at Benchmark International. Our esteemed M&A advisors will craft strategies that deliver outstanding results for your plans for the future.
Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkCorporate.com
Europe: Michael Lawrie at +44 (0) 161 359 4400 / Enquiries@BenchmarkIntl.com
Africa: Anthony McCardle at +27 21 300 2055 / McCardle@BenchmarkIntl.com
ABOUT BENCHMARK INTERNATIONAL
Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximizing solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $6B across various industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 12 offices across the world, have assisted hundreds of owners with achieving their personal objectives and ensuring the continued growth of their businesses.
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