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 (“SEMI©”) is designed to fill this gap and to meet the needs of Buyers and Sellers, Advisors and Brokers.
SEMI© 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.
SEMI© 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.
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.
SEMI© 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.
SEMI© can be either seller-side or buyer-side policy, with the following potential benefits:
The result is a SEMI© policy with the following coverage features:
SEMI© informations and features.
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.
AUD 1m to AUD 50m
Our insurers typically apply a deductible of 2% of the enterprise value, dropping upon expiration of escrow or other pre-defined period.
A policy will provide protection for:
Market-standard exclusions, including:
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.
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.
Initial Information & Participant Assignment
Disclosure, Due Diligence, SPAs & Quotes
Final Disclosure, Due Diligence, SPAs & Binding Quote
Execution & Policy Issuance and Invoicing