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SEMI©

SME M&A Insurance

Filling the SME M&A risk protection gap

SME M&A Insurance Online

SEMI©
SME M&A Insurance Online
REMI©
Real Estate M&A Insurance
Coming Soon
SUMI©
Sustainable M&A Insurance
Coming Soon

What is SEMI©?

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.

Why buy SEMI©?

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:

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 SEMI© 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 SEMI©

SEMI© informations and features.

SEMI©
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 Setup

Initial Information & Participant Assignment

1
Offline: The broker / advisor contacts io.insure & Fusion seeking M&A Insurance.
2
An NDA is signed.
2

Quote Pack

Disclosure, Due Diligence, SPAs & Quotes

3
The Seller fills out its Digital Disclosure Form (“2DF”) and provides information required (including the SPA if seller-side policy) and access to the data-room.
4
The Buyer provides its Due Diligence Reports, the quality of earnings statement, information required, and the SPA (if Buyer-side policy).
5
The Buyer fills out the Digital Due Diligence Form (“3DF”) – for a buyer-side policy only.
6
Fusion appoints external counsel, which carries out a summary review.
7
Fusion delivers a Quote Pack offer – NBIL, Draft Policy, including a warranties schedule – to the Insured and its Advisor & Broker.
3

Binder Pack

Final Disclosure, Due Diligence, SPAs & Binding Quote

8
The 2DF, 3DF, SPA, disclosure information and due diligence reports are updated by the Seller, the Buyer and their Advisors and Broker.
9
Fusion provides a Binder Pack offer –Draft Policy including a warranties schedule – to the Insured and its Advisor & Broker.
4

Signing & Completion

Execution & Policy Issuance and Invoicing

10
The Execution SPA and Disclosure Letter is uploaded.
11
The Signing NCD is executed.
12
Fusion issues the policy.
13
An invoice is issued and settled on signing.
14
The parties confirm completion.
15
The Completion NCD is executed.