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R&W Claims Trends and the Potential Impact on Premiums

Insurance giant AIG is concerned. Although the rate of claims from Representations and Warranty (R&W) insurance, which covers M&A transactions, has been steady since 2012 across the board, for deals of all sizes… they have noted a rising trend with how much they are paying out for smaller claims. In a nutshell, they are paying more on smaller claims than before. This is for policies for smaller deals where the premium was a relatively small amount. In other words, the area where premiums are down, claim payments are up. I consider this a signal from AIG. They’re saying this trend is not sustainable and that means the insurance market should look to solidify rates and potentially look at increases. I believe we should also be prepared for more stringent underwriting for these types of transactional insurance policies as well. As they put it in their recent report, M&A: Small Deals and Emerging Markets Drive Claims Activity: “This shift was picked up in AIG data between 2018 and 2021, and we expect that moving forward we’ll continue to see greater deal and claim activity in these segments. Almost without exception, the limited number of larger deals and deals overall, together with a soft market insurance environment has resulted in terms and conditions and, in particular, policy pricing that is not sustainable in the mid-to-long term.” In other words, the area where policyholders pay the least, the insurer is paying out more. The backdrop to this “warning” that they will raise rates is that I do not think AIG can attribute the whole rising trend to an issue with the claims themselves. Increased competition and a slowdown in deal-making – which caused a reduction in demand for R&W insurance – are also contributing factors. Granted, underwriting in recent years has also been

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M&A Mastery in Architecture and Engineering Unveiled

Discover the art of strategic mergers in architecture and engineering with M&A expert David Kimbrell. In this episode of M&A Masters, join me as we engage with David Kimbrell, a seasoned M&A authority in the architectural and engineering sector. With over four decades of unmatched expertise, David has masterminded the art of buying, selling, and advising firms in this specialized niche, revolutionizing the concept of strategic mergers and acquisitions. Delve into the intricate world of M&A for architectural and engineering firms. Explore David Kimbrell’s unique journey from environmental health to M&A mastery. Learn how interest rates and market dynamics influence

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What’s in Store for M&A in 2024

What’s in Store for M&A in 2024

It’s been an interesting last few years in the M&A world, to say the least. First, deal-making fell off the cliff during the pandemic. But, in 2021, after we emerged from lockdown, we had a record-breaking year for M&A activity due to pent-up demand and a tremendous amount of dry powder in the hands of eager PE firms and Strategic Buyers. According to Prequin Alternatives report from that time, PE firms alone had $1.32T on hand as of September 2021. Things slowed slightly towards the end of 2021 and there was a distinct – but inevitable – drop in deals

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TLPE Insurance Alone Wasn’t Enough to Save This Deal

An M&A deal just closed recently, and because of the unique insurance product I secured for the deal and the modifications necessary to make that fit the transaction, I think it’s worth a closer look. It involves the acquisition of a Florida-based earth moving company that specializes in delivering dirt and preparing sites for construction. It’s not a huge business. The deal was for $2.8M. But they are like a lot of companies. Family run by the founders. They’ve been around for 40 years, doing well but operating pretty much the same for their entire history. Then a small private

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Patrick Stroth Bakri akil

The Role of an Independent Sponsor

In this episode, we’re taking a look at a unique independent sponsor’s M&A strategies. My guest Bakari Akil is the founder of Graves Hall Capital, which seeks to buy and run businesses where owners and founders are seeking an exit. Bakari will share his M&A journey and advice for enticing a seller to do business with you. He’ll also cover: Why he believes buying companies is the best wealth building strategy What types of companies he’s looking for The role of reps & warranties insurance And more Mentioned in this episode: http://graveshallcap.com https://linkedin.com/in/bakariakil Transcript Patrick Stroth: Hello there. I’m Patrick

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How to Take Full Advantage of the Surge in Lower Middle Market Deal-Making

How to Take Full Advantage of the Surge in Lower Middle Market Deal-Making

Overall, there has been a slowdown in M&A activity in the past couple of years, post-pandemic. After an all-time high of 42,436 transactions in 2021, valued at more than $5.6T… deal-making tumbled to 41,808 transactions valued at $4.5T in 2022. And so far, with Q2 numbers just in, it looks like 2023 is following this “downward” trajectory. This is to be expected as the market “rebalances” after the record-setting deal-making frenzy we had in 2021, which was not sustainable because the result of very special circumstances with the global shutdown in 2020… and the rush to make acquisitions when the

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Looking Back to Look Forward at the State of M&A Deal-Making

Looking Back to Look Forward at the State of M&A Deal-Making

As summer ends, it’s a good time to take stock and review M&A activity so far in 2023 and what is on the horizon for the rest of the year… and beyond. Some industry reports indicate that due to interest rates and the still-ongoing repercussions from the failure of Silicon Valley Bank there is a lot of uncertainty among deal-makers. As a result, there has been a slowdown. But as Allied Advisers put it in their recent report, Navigating M&A in Uncertain Markets, these conditions have also paved the way for “a rebound in M&A volume and value in the

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How AI Will Take Over M&A Due Diligence

AI is on everybody’s mind these days… the topic du jour. You’ve no doubt seen how this technology will revolutionize how people live, work, communicate… Really there is no area where AI will not touch – if it doesn’t already. That extends to the world of M&A, specifically the due diligence process. Basically, the number of M&A transactions is ever-increasing. And with deals getting more and more complex, every step of the way towards getting those deals done is increasing in complexity too. Take deal structures. In the past, a Seller would have an asking price for their company. After

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How TLPE Insurance Made the Perfect Conditions for a Stock Sale

How TLPE Insurance Made the Perfect Conditions for a Stock Sale

When owners want to sell their company there are two ways they can do it: Sell the assets of the company, including the equipment, product inventory, customers, and the like. In this case, the Seller retains the “shell” of the corporation to either shut down or use in another business. Sell the stock of the company. In this case, the Buyer gets everything, and the Seller simply walks away with nothing – but the proceeds of the sale, of course. As with many aspects of M&A deals Buyers and Sellers have opposing ideas about the preferred method of conducting the

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