The Hindu Business Line : Howden India finds takers for M&A insurance

The failure of the Jet-Air Sahara deal could have been less painful for the partners, if they had insured themselves. Now, international insurers are offering cover in India against the loss arising out of mergers and acquisition (M&A) break-ups.

Howden India, leading international brokers, which has introduced transactional insurance of M&A, is now finding takers for their insurance cover.

Mr Praveen Vashishta, CEO, Managing Director, Howden India, said a few companies involved in M&A deals had already expressed interest in the products. "Insurance of mergers and acquisitions are highly structured programmes and they insure the associated transactions. A number of issues may crop up between the signing of the sale purchase agreement and the deal actually coming through," he said. Howden India is an arm of the UK-based Howden insurance brokers.

According to Mr Vashishta, with more foreign institutional investors entering India and several joint ventures being struck between domestic companies and global firms, such insurance would find takers. "Out of a 100 deals, around four could be getting aborted," he added.

What could have come to the aid of Jet airways, for instance, is "Aborted bid cost insurance" and "Warranty Indemnity insurance". "Aborted bid cost insurance" reimburses the company for costs associated with an agreed transaction that has been aborted for reasons such as failure of either of the parties meeting closing conditions, competition from a bid by a third party, rejection by shareholders, intervention by a regulatory body. The insurance covers advisory, legal and accounting, brokerage and public relations fees on agreed bid, merger, acquisition or disposal.

The `Warranty and Indemnity insurance' reimburses the insured (either the vendor or the purchaser) in the event of a breach of warranty or indemnity statements made in the sale purchase agreement.

Insurance of M&A was first introduced in the UK during the1980s in response to such growing activity in the country. The covers are now popular in both the US and the UK although global figures are difficult to obtain.

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