Risk
Risk due diligence

 

ASATS Case Study: Risk Due Diligence


Client situation

A manufacturer of home construction materials targeted a competitor's division that made related products but was concerned about the seller's balance sheet reserves for warranty obligations.

Aon solution

Aon's actuaries determined the estimate of the ultimate warranty liability was US$ 40m greater than the Seller's accrual. The expertise of the actuary in this space, coupled with the documentation of the actuarial study, enabled the buyer to negotiate a reduction in the purchase price.

Client situation

A foreign Buyer targeted the US operations of a foreign Seller. The seller had an integrated insurance program with significant retentions funded through an off-shore captive. The seller wanted to divest all US assets and liabilities, including US$ 100m losses reinsured by the captive, but did not want to release cash held by the captive. The buyer had agreed in the LOI to assume the liabilities from the captive.

Aon solution

Aon's due diligence team and captive practice group worked with the buyer's accounting team and actuaries to quantify the retained losses and allocated costs related to the operations to be divested. This team of advisors provided the buyer with the negotiating power to persuade the seller to retain the losses within the captive with no increase in the purchase price, averting having the acquired operations pay a second time for those pre-funded liabilities.

Client situation

A few days prior to the target's shareholder meeting a major shareholder filed a lawsuit seeking an injunction against the transaction. The target company's broker was unable to obtain approval from the carrier to allow defense counsel to file necessary motions.

Aon solution

Aon became involved and within 24 hours had secured approval for defense costs and coverage under the applicable policy. Aon successfully assisted in reaching a settlement with the claimants within 1 week for 50% of the client's retention. Aon's quick action allowed the transaction to progress as scheduled while mitigating potential defense and settlement costs related to the litigation.