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Insurance capital remains a critical tool for dealmakers to de-risk and facilitate deals, particularly where the transaction involves sellers or target businesses that are in distress.

Overview

  • Deal flow for Q1 of 2020 started well off the back of strong momentum from the end of a busy 2019. However, the fallout from the burgeoning impact of COVID-19 and public market sell-off in February and March tempered a number of transactions, with fewer new deals coming to market and existing deals slowing down.
  • With lockdown measures easing across Australia and New Zealand, we are hopeful M&A activity will increase in the second half of the year as markets recover. Infrastructure and health-related transactions have stood up well during the year, and we expect this trend to continue.
  • PE firms still have considerable capital to deploy, but to date their attention has been focused on their portfolio companies and the aftermath of COVID-19. Now, we expect PE firms to be enticed back into the market, especially if distressed assets are available for sale at cheaper prices.
  • PE firms will also be looking for value in take private transactions where the current market capitalisation of a listed company continues to be significantly lower than its pre-COVID-19 peak.
  • Insurance capital provides a critical tool to de-risk and facilitate deals, including where the target is in distress. Sellers can attract stronger interest in their assets by offering bidders a customary suite of warranties and indemnities. Buyers can gain comfort from having access to secure insurance capital and greater flexibility around structure and scope of the warranty package than would be typical on a distressed deal.
  • The number of insurers in the Asia-Pacific market continues to increase, with insurers able to inject more insurance capital on deals, driving competition. With fewer deals coming to market this year, we expect prices and coverage terms to remain competitive.

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Sam Thomas

Sam Thomas

Client Director - M&A and Transaction Solutions
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