Kako približiti kupca i prodavca prilikom M&A transakcija?

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PROPIETARY & CONFIDENTIAL
M&A INSURANCE SOLUTIONS FOR
THE CEE/CIS MARKETPLACE
Budapest, 14 April 2015
Dr. Thomas M. Mannsdorfer – Underwriting Director | M&A Insurance
ANV Global Services Ltd., Spanish Branch

2. PROPIETARY & CONFIDENTIAL
ANV – WHO WE ARE
Key figures:
• Founded in 2010 by R. Matthew Fairfield
• Main investor: Ontario Teachers‘ Pension
Plan, one of the 20 largest pension funds in
the world (assets under management of ca.
USD 130 billions)
• Acquisition of three Syndicates at Lloyd‘s
(1861, 5820, 779) in combination with strong
organic growth
• Experienced senior management team
ANV overview:
• Focus on speciality and niche insurance products
• Branches in Barcelona, London, Hong Kong, New Jersey, Kansas City
and Rio de Janeiro
• Over 250 employees
• Gross written premium ca. EUR 700m
• S&P financial rating: A+ (Lloyd‘s)
• Risk bearing entities: ANV Syndicates (1861, 5820, 779)
• The MGU has a strong focus on local retail markets (in particular
Continental Europe, Asia and Latin America)
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3. PROPIETARY & CONFIDENTIAL
WHAT IS A W&I INSURANCE
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Warranties & indemnities insurance or reps & warranties insurance (W&I insurance) can
be structured as a seller- or buyer-side policy which covers losses arising from a breach of
warranty or claims under an indemnity. W&I insurance covers risks that are unknown at
inception of the policy.
 A buyer-side W&I insurance covers all loss suffered by the buyer arising from a breach
of sellers’ warranty or, in certain cases, under an indemnity (first party loss insurance).
 A seller-side W&I insurance grants cover for sums that the seller is obligated to pay as
a result of a warranty or indemnity claim made by the buyer under the SPA, due to a
breach of warranty or to a third party claim (third party liability insurance).
The W&I insurance includes coverage for reasonable costs related to the prevention,
mitigation, investigation, defence or settlement of any covered claim.

4. PROPIETARY & CONFIDENTIAL
KEY ADVANTAGES
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Seller seeks: Buyer seeks:
• Clean exit
Liability coverage for warranty/indemnity claims
and loss payments
• First-party coverage
Direct claim against the insurer for loss suffered
resulting from a breach of warranty or indemnity
• Full proceeds available
Sale proceeds may immediately be distributed to
sellers, mainly PE
• An excellent debtor
W&I insurers generally have a good rating,
“A” or higher
• An alternative securitization
Replacing or reducing the need for an escrow,
bank guarantee, deferred price or loan notes with
subsequent costs reduction
• No insolvency risks
In particular, when the seller is a PE fund to be
dissolved after the sale or is a distressed company
• A more attractive target
“Dress up your bride”
• A more attractive bid
“Sugar your bid”
Seller and Buyer seek (alignment of interest):
• to speed up closing of the deal
• to break up potential deadlocks (bridging gaps in negotiations)
• not to burden their commercial relationship with possible warranty claims

5. PROPIETARY & CONFIDENTIAL
HOW IS THE UNDERWRITING PROCESS RUNNED
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Transaction
Underwriting
NBI 1
SigningContractual negotiations
Due diligence
Closing
Phase I: 48 hours
Phase II: 5 - 8 days
(including external legal review)
UW Call 2
Submission
Insurance Policy
(from signing)
1 Non-Binding Indication: transaction documents are roughly analyzed and a non-binding quotation is provided with a tentative coverage spreadsheet.
2 Underwriting Call: conference call where the main issues arisen from the thorough review of the transaction documents are discussed by the proposed insured, ANV
and their respective advisors.
Insurance Policy
(from closing)
Drafting of the policy

6. PROPIETARY & CONFIDENTIAL
REQUIRED DOCUMENTATION
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Phase I
 Transaction summary and insurance
requirements
 Draft of sale and purchase
agreement (SPA)
 Information memorandum
 Latest annual accounts
Phase II
 Final draft or execution version of
the SPA
 Vendor’s due diligence (if available)
 Buyer’s due diligence
 Full data room access
Underwriting Process

7. PROPIETARY & CONFIDENTIAL
PRICING OF STANDARD W&I INSURANCE
• Low policy excess/retention
(≤ 1% of consideration)
• Tipping retention/basket
• Broad definition of “Loss”
• Incomplete or only internal
due diligence is available
• Low sum insured (application
of minimum premium)
• Certain countries (i.e., USA,
Russia, mainland China) and
“riskier” industry sectors
• High policy excess/retention or
underlying escrow
• Balanced SPA with adequate
qualifications (to materiality
and seller‘s knowledge)
• Narrow definition of “Loss”
• Short duration of contract
• High quality of due diligence
(renown external experts)
• Extensive disclosure process
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Premium is generally between 1-2% of the insured limit of liability,
depending on the following factors:
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8. PROPIETARY & CONFIDENTIAL
W&I INSURANCE IN CEE/CIS – RECENT DEALS
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Project Belgrade: Buyer-side W&I Insurance for a group of companies
active in south-eastern Europe in the non-alcoholic beverage and dairy
industry, sold by the liquidators of the Holding companies (Dutch entities).
Key challenges of this deal were the wide array of contingent issues that
had to be identified and dealt with in a separate way (known issues are
not covered by W&I insurance) as well as the complex corporate
structure of the group that extended to different south-eastern European
jurisdictions. Further, pending antitrust issues.
Project Office Building: Property deal for an office building in Budapest.
Buyer-side, with the client being a global real estate private equity.
Problems with lack of DD on chain of ownership, and interpretation of new
Hungarian Civil Code in that respect. In the end we bound the policy for
Project Office Building, with a reduced limit of liability (EUR9m) and no
coverage for the warranties relating to title. First Title, a specialist title
insurer, offered the title insurance policy for the full purchase price. All
parties were happy with the final outcome.

9. PROPIETARY & CONFIDENTIAL
W&I INSURANCE IN CEE/CIS – RECENT DEALS
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Project Lei: Buyer-side W&I insurance for a Hungarian investor in the
energy sector that acquired a majority of shares of a limited liability
company in Romania, which owns and operates run-off-the-river micro-
hydro power plants in Romania. The sellers were two private companies
of which neither was willing to provide a seller cap of significance. Some
of the major issues in our risk assessment included the fact that the
target company had only non-audited financial accounts (as no audit was
required by the applicable Romanian financial legislation for this type of
legal entity), some specifications around the target properties were
unclear and on-going, identified litigation had to be excluded from
coverage.
Project Ruby: Seller-side W&I insurance for a real estate fund for a
business park in Łódź (property) that has been acquired by the seller
from another investment fund in 1999. There were several issues
related to the environmental exposure as well as to a broad array of
missing documents, governmental approvals and permits. Remote risk
of reclaim as well as structural damage due to former mining activities.

10. PROPIETARY & CONFIDENTIAL
CLAIMS: ANV PHILOSOPHY
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Fundamental objective to honour all valid claims swiftly and fairly.
Close work between underwriters and claims team to ensure the
intention and response of the policy is clearly understood.
Professional claims handling service focused on a proactive,
efficient and straight forward approach.
Relevant parties well informed, with on-going dialogue as claim
progresses.
Each claim handled on an individual basis by a specialist adjuster,
offering a personal and tailored claims experience.
Claims process supported by utilising the latest technology, allowing a
speedy distribution of information and accurate recording of data.

11. LOSS RESPONSE MAP – BUYER SIDE W&I-INSURANCE

12. PROPIETARY & CONFIDENTIAL
MARKET OVERVIEW
EMEA
ASIA
PACIFIC AMERICAS TOTAL
Limits of insurance (USD millions) 6,858 2,575 3,360 12,793
Number of transactional risk policies 313 130 185 628
Private equity policies (% of policies) 56% 42% 56% 53%
Corporate policies (% of policies) 44% 58% 44% 47%
Buyer-side W&I policies (% of policies) 88% 63% 78% 80%
Seller-side W&I policies (% of policies) 12% 37% 22% 20%
 As the left chart illustrates, limits of insurance placed
globally have increased by 155% since 2010
 The average transaction limit size is about USD 20m
 80% buyer-side and 20% seller-side policies
 The insured has been 53% of the cases a private equity
company and 47% of the cases a corporate
 As is the case in certain niche M&A markets, such as the
Nordics and Australasia, it is expected that M&A
insurance will continue to grow in Europe, the Americas
and further afield.
 Within Europe, M&A insurance is most commonly used
in Germany, UK and the Nordic regions, though an uptick
is being seen in France, Italy, Spain and Eastern Europe
 US companies’ growing interest in M&A insurance also
mirrors their growing crossborder activity. Conversely,
there is a growing number of institutional investors in
Europe now looking to sell companies
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13. PROPIETARY & CONFIDENTIAL
ANV CONTACTS
ANV M&A Insurance
www.anv.eu.com | m&a@anv.eu.com
Thomas M. Mannsdorfer Underwriting Director +34 93 545 9025 +34 674 178 840 thomas.mannsdorfer@anv.eu.com
Alex Christians Underwriting Manager +44 207 280 6123 +44 758 703 4838 alex.christians@anv.eu.com
Luc Joordens Underwriter +34 93 545 9024 +34 662 448 187 luc.joordens@anv.eu.com
Marta Batalla Underwriter +34 93 545 9020 +34 680 265 043 marta.batalla@anv.eu.com
Paul Hutchins Underwriter +44 207280 6124 +44 746 914 6212 paul.hutchins@anv.eu.com
Alicia Sánchez Underwriter +34 93 548 4925 +34 667 539096 alicia.sanchez@anv.eu.com
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