Marsh Reports Asia Deal Makers Focus on Heightened Risk Mitigation

A report from Marsh’s London office notes that “investors in Asia are returning to the merger and acquisition table with a renewed interest in risk mitigation tools such as Warranty & Indemnity Insurance (W&I Insurance).

“The latest edition of the “Transactional Risk Update: Half-Year 2010,” a regular publication from Marsh’s Private Equity and Mergers & Acquisitions (PEMA) Services, features a special focus on M&A trends in the Asia Pacific region, including a discussion on insurance protection.”

Josh Roach, Asia Leader for Marsh’s PEMA Services, commented: “As mid-market M&A in Asia continues to be active, and large, leveraged deals begin to show signs of a revival, both buyers and sellers are looking to protect their interests more vigorously.

“The lessons from the global financial crisis remain fresh in investors’ minds as buyers and sellers are looking for insurance products to better allocate deal risk, especially for cross-border transactions where they may be investing in less familiar territories or selling to a foreign buyer. W&I Insurance – a relatively new insurance product in Asia but more common in the US and Europe – is gaining popularity as the preferred tool to protect their interests.

“W&I Insurance is now available domestically in China; a clear sign that the M&A market there continues rapidly to become more sophisticated, with demand for risk transfer solutions and services on the rise.”

The bulletin also indicated that, according to the latest Thomson Reuters data from the first-half of 2010, “Asian M&A deal values increased significantly compared to the same period last year. Hong Kong alone saw an increase of 275 percent in completed M&A deal values. The data also indicated a significant jump among private equity firms willing to commit capital after staying on the sidelines during the recent economic turmoil.” (Source: Thomson Reuters)

Marsh explained that during share and asset sales it is common for the seller to provide warranties to the buyer on a broad range of matters about the target, such as title to shares, property, employment, tax, intellectual property and other commercial matters. W&I Insurance (also known as Reps and Warranties Insurance) is an insurance solution which provides recourse against breaches of the warranties and indemnities being given by the seller.

“In Asia, we have seen more queries regarding W&I Insurance in the first half of 2010 than in all of 2008 and 2009 combined. This is a clear indication that while dealmakers are hungry, they are adopting a more considered and risk-aware approach than during the boom years of 2006 and 2007,” Roach added.

“As economic power and M&A activity continues to shift to Asia, the demand for innovative and sophisticated services will only grow. Marsh’s PEMA Services is well-placed to help clients close deals with higher degrees of comfort in the region.”

To access Marsh’s report, go to: http://www.insurancemarketreport.com/docs/TransactionalRiskUpdateV4.pdf

Source: Marsh