Merger and Acquisition Due Diligence Process for Risk Managers

 An important part of the merger and acquisition process is the risk management due diligence evaluation. This      evaluation can affect the sales price, the terms and conditions of the purchase agreement and the finalization of the  merger and acquisition.

The risk management due diligence should uncover undisclosed and unexpected liabilities and exposures that the acquiring company could assume as a part of the merger and acquisition.  The risk management review should assess  the acquired company's risk management program and look for opportunities to improve the coverage and save costs  after the merger and acquisition is finalized.

The risk management due diligence process is important for a number of reasons:  (1) the growing number and  complexity of insurance products; (2) the unpredictability of court decisions regarding whether the successor company  is entitled to the insurance assets of the acquired company when claims arise; (3) the increased complexity of insurance  claims and lawsuits; (4) the high cost of litigation; (5) the increasing number of long-tail claims; and (6) insurance  companies looking to avoid providing coverage for claims presented to them for acquired companies. 

Attached on our website is my recent article “Merger and Acquisition Due Diligence Evaluation and Checklist” which  should provide risk management guidance to companies who are involved in a merger or acquisition.   Please feel free  to contact me if you have any questions.