Revealed – What is driving global M&A claims trends?

A new report from Liberty Global Transaction Solutions (GTS), part of Liberty Mutual Insurance, sheds light on current global M&A claims trends.

of Liberty GTS 2022 Billing Briefing In addition to discussing other key trends gleaned from GTS claims data from January 1, 2019 to July 31, 2022, we also discuss the types of M&A deals and industries most likely to involve claims. Contains detailed information.

Key findings include:

  • The frequency of reported claims has decreased slightly, with the risk bound now at 16% in 2019, compared to a historical average of around 21%.The widely anticipated post-COVID billing surge did not materialize
  • Mega deals ($1 billion+) have the lowest frequency of claim notifications in Europe, the Middle East, Africa and the Americas
  • Transactions with an estimated value of $250 million or less accounted for 64% of paid and pending claims.
  • Instances of multiple notifications have more than doubled since 2019, rising from 10% to 24.5%. This trend is most pronounced in his EMEA region, largely due to the growing awareness of the insured’s notification obligations.

Rowan Banbod, President of Liberty GTS, said: “While there has been uncertainty about the impact of the COVID-19 pandemic, we have not seen the expected surge in claims post-pandemic. It highlights the strength of M&A dealmakers who have effectively determined the risk of individual M&A deals in a disruptive 18 months.”

The report also looked at the most common causes of complaints. Among its findings:

  • Tax-related notices dominated Asia Pacific at 36%, EMEA at 34%, and the Americas at 17%. Most of these notices are preventative and will be received within 24 months of the policy’s inception, but there has been an increase in the number of notices regarding large-scale ($10 million or more) tax-related issues.
  • Accounting and financial issues accounted for 29% of high-severity claims and 32% of medium-severity claims, despite accounting for only 11% of all notifications over the last 18 months.
  • 48% of non-tax notices included a third party claim.Most of them involved employee-related or intellectual property-related disputes
  • Economic headwinds, such as inflation, potential recession, and supply chain disruptions, may increase the risk of certain issues, such as undisclosed price increases, fraud, and accounts receivable.

“Tax-related issues continue to cause a high number of notices this year, but on the non-tax side, we have seen a significant increase in third-party claims,” said Bamford. “This is most likely due to the increased threat of litigation facing companies as they seek every means to generate revenue when faced with economic headwinds.

“Going forward, sellers will need to consider ESG-related issues, as buyers now expect to provide specific assurances on these issues. Our underwriters stand ready to help our clients navigate their deals through these turbulent times.”

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