“The pricing aspects are driven by the insurers’ perception of the degree of risk which they believe they are taking-on. The excess plays a key factor in the pricing of the policy because this represents the risk-sharing being undertaken by the insured.”


Charles Whitefoord


Partner in Baker & McKenzie’s Corporate Group


n Specific indemnities (but other products may provide coverage here) and purchase price adjustments.


Pricing There are a number of elements to the pricing of W&I Insurance:


n Premium (one off payment) – premiums in the London market for main-stream West European deals are currently around 1% of the amount insured


n Excess – approximately 1% of the EV n Brokerage Fees – consisting of a success fee (linked to the amount of insurance arranged) and an hourly rate fee


n Insurance Premium Tax (“IPT”) – varying depending on the residence of the insured e.g. a UK insured would be subject to 6% IPT on the premium.


The pricing aspects are driven by the insurers’ perception of the degree of risk which they believe they are taking on. The excess plays a key factor in the pricing of the policy because this represents the risk-sharing being undertaken by the insured. For larger deals, the insurance will be tranched which will mean that the higher slices of insurance will be materially cheaper than the lower tranches of insurance. In all these discussions, the broker plays a helpful role in comparing premiums to what they have achieved on other transactions to help drive the best price for the transaction.


Baker & McKenzie Private Equity We act for a wide range of sponsors, portfolio companies and management teams around the world. Globally, we have nearly 300 private equity lawyers across EMEA, North America, latin America


and Asia Pacific. We operate across all sectors and we bring the industry expertise developed through long standing relationships with our corporate clients to bear on our deals. Examples of these industries are:


TMT We are global market leaders and have been involved with much of the cutting edge work performed in the industry for major operators and investors including leading IT and outsourcing vendors, operators, content providers and OTT providers.


Healthcare We have a recognised global pharmaceuticals and healthcare industry group, comprising members with industry and/or a scientific background who act for key players in the healthcare, medical devices and drug sectors. This group has experience in M&A and the other practice areas relevant to this sector. We know the key players and key investment opportunities.


Natural Resources and Energy We have leading industry knowledge in the oil and gas, power and mining sectors, where we act for many of the established players across the M&A and project development areas.


Infrastructure We do repeat deals for a number of infrastructure funds and understand the mindset of infrastructure funds on issues like yield, exit horizons, financing and management incentivisation. We have specific expertise in infrastructure deals relating to roads, ports, water and aviation and airports. n


charles.whitefoord@ bakermckenzie.com


Partner in Baker & McKenzie’s Corporate Group with over 20 years of experience in advising client on private equity and M&A transactions. From 2003- 2008 he was global head of the Firm’s Private Equity Group. Charles specialises in leveraged buyouts, investments, acquisitions and disposals, re-organisations and joint venture work - both UK and cross-border.


Risk and Insurance in Private Equity and M&A 2012/13


Author Viewpoint 41


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