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Mio©

Mergers and Acquisitions Insurance Online

Filling the SME M&A risk protection gap

SME M&A Insurance Online

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What is Mio©?

There is a risk protection gap in the small to medium sized business Mergers and Acquisitions (M&A) market, with a scarcity of insurance capacity and resources dedicated to this segment. SME M&A Insurance (“Mio©”) is designed to fill this gap and to meet the needs of Buyers and Sellers, Advisors and Brokers.

Mio© solutions are delivered by io.insure Pty Ltd. (“io.insure”) in partnership with Fusion Specialty Insurance Pty Ltd. (“Fusion”), and designed to transfer risks associated with mergers and acquisitions (M&A).

io.insure has streamlined the workflows to create a better insurance experience and to design new M&A insurance products. These products are delivered on the World’s 1ST Online M&A Insurance Marketplace called io.insure. Fusion provides paper & capacity support, underwrites each risk and delivers polices.

Mio© is a Buyer or Seller-side M&A insurance product, with a standardised and semi-automated workflow, using a Seller Digital Disclosure Form (“2DF”)© and a Buyer Digital Due Diligence Form (“3DF”)© for Buyer-side and Seller-side policies, a set of warranties designed for smaller-size SME transactions, a fulsome but narrower coverage compared to a traditional representations & warranties product, and a lower price point.

This product, whether held by the Buyer or Seller, provide financial cover to the Insured in the event of a breach of warranty, a claim under the tax covenant or a misrepresentation in the underlying acquisition agreement. The Buy-side policy allows the Buyer to claim from the Insurer what they are contractually entitled to from the Seller under the acquisition agreement.

The policy can be used as a powerful deal tool to streamline negotiations between the parties. It can allow the Seller to limit its liability, whilst also giving the buyer the protection it requires through a W&I insurance policy.

Why buy Mio©?

M&A continues to be a key strategy for SMEs, Private Equity and Venture Capital firms, and corporations to enable exits and to drive growth and increase profitability of businesses domestically, cross-border and across various industry sectors.

Mio© insurance enable deals through the transfer of potential specific risks relating to that M&A transaction, helping to both reduce uncertainty and to close deals more quickly.

Mio© can be either seller-side or buyer-side policy, with the following potential benefits:

Benefits for the seller

Enables a clean exit
Easing of deadlocks and facilitation of the sale
Immediate distribution of sales proceeds with a reduced need for escrows
A more attractive target
Potential for a higher valuation
Specialist liability coverage

Benefits for the buyer

Improved certainty of payment due to insurer’s superior credit rating
Protects investment and supports lending for the transaction
Enhances the bid position and enables the transaction negotiations
Increases Board transaction comfort
Protects against future disputes involving target management
First party coverage
Available in:
Coming soon:

Protections features

The result is a Mio© policy with the following coverage features:

Losses resulting from a breach of a seller warranty or a seller’s obligations in a tax deed of covenant
Costs associated with defending claims
Extended duration of cover compared to the survival period in the Sale Agreement
Flexibility with thresholds compared to the Sale Agreement
Fraud on the part of the seller (buyer-side policy only)

Product Mio©

Mio© informations and features.

Mio©
Policy Limit

Aggregate policy limits are typically AUD 1m to 2.5m, and ~10% to 30% of the target’s enterprise value, although a policy limit of up to 100% of the enterprise value can be acquired.

Enterprise Value

AUD 1m to AUD 50m

Retention

Our insurers typically apply a deductible of 2% of the enterprise value, dropping upon expiration of escrow or other pre-defined period.

Policy Periods

A policy will provide protection for:

  • 2 years following completion for general warranties, and
  • 5 years following completion for title and capacity warranties, tax warranties and claims under the tax indemnity.
Exclusions

Market-standard exclusions, including:

  • Any fact, matter or circumstances of which the buyer’s deal team members have ‘Actual Knowledge’;
  • Asbestos / pollution;
  • Purchase price adjustments;
  • Underfunded defined benefit pension;
  • Fines and penalties;
  • Excluded and partially covered warranties.
Premiums

The premium is a one-off cost determined by the limits of insurance required, the nature of the transaction, the jurisdictions, the industry sector and the governing law of the acquisition agreement.

Average premium rates from 3% to 5% of the policy limit.

Legal Fee & Administration Fee

Insurer charges a Legal fee expense agreement to be entered into before commencing formal underwriting. This is to cover the cost of instructing external counsel. Summary reviews are conducted.

Legal fee typically ranges from AU$ 5,000 to AU$25,000 before applicable taxes. The legal fee is charged in addition to the premiums.

Available in:
Coming soon:
1

Project Set up by the ioPartner

1
Become an ioPartner to enable access to the io.insure platform and to obtain Mio insurance solutions for clients involved in a transaction.
2
Set up a new Project on the io.insure platform to submit initial information about the transaction and the party seeking M&A insurance.
3
At this Project Set Up stage, some basic information about the transaction and parties involved is required such as:
  • Name of Buyer and Seller
  • Name of potential insured under the Mio policy
  • Name of Target to be acquired
  • Estimated purchase price
  • Estimated sum insured
2

Digital Q&A and Quote Pack

4
Digital Q&A and Non binding Quote
5
Digital questionnaire forms are completed and information uploaded including the Sale Agreement, disclosure letter, Target financial accounts and any due diligence reports.
6
A Quote Pack offer includes a Mio non binding indication of terms, a draft Mio Policy, and examples of Covered Risks that could be insured.
7
At this stage, the Covered Risks may be incorporated in the Sale Agreement in place of representations and warranties. This is an optional step and helps to ensures consistency of transaction risk cover for a Buyer or Seller.
3

Binder Pack

8
A Binder Pack is issued with final policy terms as follows:
  • final Mio Policy
  • schedule of Covered Risks
  • binding Quote
4

Commencement & Completion

9
Mio Commencement No Claims Declaration is completed, signed on the platform via DocuSign and submitted.
10
Mio Policy and Covered Risks are issued
11
An invoice is issued for the Premium. The invoice is payable by the insured on Commencement of the policy which often coincides with signing date of the Sale Agreement and the signing date of the Mio Policy Commencement No claims declaration.
12
Unless there is simultaneous signing and completion of the transaction, a Mio Policy Completion no claims declaration is signed by the insured via DocuSign on the Completion Date.
13
The Mio policy is now effective.