Slowing Market for Mergers and Acquisitions Keeps Insurers Busy

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Corporate M&A dealmakers use risk management consultants to price deals and minimize hidden financial liabilities. By Paula L. Green

Even as the pace of corporate mergers and acquisitions slows along with the economy this year, risk management consultants are filling their calendars as corporations doing the deals grow more risk-averse than ever. With less cash in their pockets and more demanding and edgier shareholders, corporate executives are using risk managers to scour the costly financial transactions for hidden liabilities and financial holes they want to avoid.

"There are fewer mergers and acquisitions opportunities, but when the deals do come up, people are scrutinizing them and doing their due diligence," said Douglas Oliver, a vice president at Chubb Financial Solutions in New York."People are being more prudent. They're digging deeper. They want to know they're getting the right price and that they're paying the right price."

As a result, risk management consultants are finding more elbow room at the board tables usually dominated by corporate attorneys and accountants. With their finely honed risk assessment skills, the consultants are helping dealmakers price a transaction by completing an extensive due diligence investigation that identifies the current liabilities and assets of each partner.

The investigation can help both buyer and seller place a price tag on unpredictable expenses such as workers compensation and product liability claims or environmental risks associated with a target company's land holdings. While corporate accounting firms have long looked at tax and regulatory issues, risk managers can help quantify the risk associated with an adverse tax ruling and even work out a insurance solution that will minimize or eliminate the potential financial downside.

Other areas that come under scrutiny during the due diligence process are pension fund liabilities; the value of a firm's intellectual property rights; business interruption exposures; and any looming costs resulting from shareholder lawsuits. …