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Services to Support Private Equity

Mergers and acquisitions continue apace, driven by low interest rates. But the risks involved are broad and complex.
By: | May 2, 2016 • 5 min read

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The year 2015 was a record for mergers and acquisitions, driven by an
environment of low interest rates, low organic growth and shareholder pressure for value.

For private equity firms, those conditions presented opportunities for expansion, but also made it more challenging to deliver high returns for investors year after year. A quiet IPO market adds to the pressure, robbing firms of their traditional exit strategy.

“IPOs launched within the past two years have been trading lower than their initial offering price,” said Andy Peterson, head of private equity for Zurich Global Corporate in North America.

“Scale does matter, and it’s been increasingly hard to go it alone. Mergers and acquisitions are ways to help spur growth.”

Activity in the private equity field remains high, and increased fundraising in 2015 means there is cash ready to keep M&A at the forefront of conversations in the deal room in 2016.

The risks involved in bringing two companies together are broad, complex and can diminish the value of any deal without proper mitigation. With far fewer IPOs, private equity firms are holding onto their portfolio companies longer, increasing their exposure.

Zurich_SponsoredContent“The right carrier partner can provide value at every step of the investment cycle — deal generation, due diligence, postacquisition and exit — through a mix of insurance products and enterprise risk solutions.”
— Andy Peterson, Head of Private Equity for Zurich Global Corporate in North America

Insurance not only protects PE firms from liability shouldered by acquired companies, but also acts as an asset to bring to a negotiation.

The right carrier partner can provide value at every step of the investment cycle — deal generation, due diligence, post-acquisition and exit — through a mix of insurance products and enterprise risk solutions.

“Zurich has the best-in-class capabilities to support our customers’ goals at every phase,” Peterson said.

Enterprise Risk Solutions

Enterprise risk solutions help private equity firms conduct due diligence more thoroughly, and can help them decide whether to continue with a deal or pull the plug.

Many of Zurich’s most valuable risk management insights relevant to private equity decision-makers come together in its proprietary Zurich Risk Room, an online aggregation of data that customers can reference as they research target companies, their industries and the risk exposures they may present at home and abroad. The tool can help customers identify the correlation between various risks and test assumptions before making a strategic decision.

“For example, a private equity customer is considering an acquisition in Germany. They can use tools in the Zurich Risk Room to create a flood map and determine flood exposure at the property. That could either bolster their confidence in the acquisition or convince them not to go through with the deal because the risk is too high,” Peterson said.

Zurich Onsite is another innovative tool that is changing the game for risk engineering solutions provided to many customers. The tool increases the transparency of the whole risk assessment process, and enables customers to obtain better insights from site visits than ever before.

These insights enable more informed conversations with the risk engineer during visits, prompting quicker action on risk improvement actions and helping businesses deliver on their loss prevention strategies.

Sophisticated Structures

Once a deal gets the green light, PE firms familiar with the utilization of captive insurers may be positioned to leverage that experience to manage many and perhaps all of their risk portfolios. Building a self-insured structure for an entire portfolio within a captive can deliver a high degree of flexibility while providing coverage for the risks that a firm could inherit from its assets. In effect, a captive helps minimize risk and maximize financial freedom.

“How we structure a program will differ depending on a client’s unique goals and risk appetite, but captives provide a way to pull an array of risks under one roof,” Peterson said.

International Capabilities

Companies looking to expand globally face additional challenges with local regulatory and compliance requirements. While North America still leads the way in terms of investment and deal generation, Europe is not far behind and Asia is gathering steam. Additionally, emerging markets offer more and more opportunities for companies to establish an international footprint.

“Your insurer has to have the capability to write local policies back to a U.S. master policy, and doing that well is a daunting task,” Peterson said.

He noted that Zurich is one of a few carriers with the international capabilities to support expansion and acquisitions abroad.

The information in this publication was compiled from sources believed to be reliable for informational purposes only. We do not guarantee the accuracy of this information or any results and further assume no liability in connection with this publication. We undertake no obligation to publicly update or revise any of this information. This is intended as a general description of certain types of insurance and services available to qualified customers through the companies of Zurich in North America, provided solely for informational purposes. Nothing herein should be construed as a solicitation, offer, advice, recommendation, or any other service with regard to any type of insurance product underwritten by individual member companies of Zurich in North America, including Zurich American Insurance Company, 1400 American Lane, Schaumburg, IL 60196. The policy is the contract that specifically and fully describes the coverage, terms and conditions. Coverages and rates are subject to individual insured meeting our underwriting qualifications and product availability in applicable states. Some coverages may be written on a nonadmitted basis through licensed surplus lines brokers.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Zurich. The editorial staff of Risk & Insurance had no role in its preparation.




Zurich Insurance Group, Ltd is an insurance-based financial services provider with a global network of subsidiaries and offices in North America and Europe as well as in Asia Pacific, Latin America and other markets.

More from Risk & Insurance

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Risk Management

The Profession

Pinnacle Entertainment’s VP of enterprise risk management says he’s inspired by Disney’s approach to risk management.
By: | November 1, 2017 • 4 min read

R&I: What was your first job?

Bus boy at a fine dining restaurant.

R&I: How did you come to work in this industry?

I sent a résumé to Harrah’s Entertainment on a whim. It took over 30 hours of interviewing to get that job, but it was well worth it.

R&I: If the world has a modern hero, who is it and why?

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The Chinese citizen (never positively identified) who stood in front of a column of tanks in Tiananmen Square on June 5, 1989. That kind of courage is undeniable, and that image is unforgettable. I hope we can all be that passionate about something at least once in our lives.

R&I: What emerging commercial risk most concerns you?

Cyber risk, but more narrowly, cyber-extortion. I think state sponsored bad actors are getting more and more sophisticated, and the risk is that they find a way to control entire systems.

R&I: What is the riskiest activity you ever engaged in?

Training and breaking horses. When I was in high school, I worked on a lot of farms. I did everything from building fences to putting up hay. It was during this time that I found I had a knack for horses. They would tolerate me getting real close, so it was natural I started working more and more with them.

Eventually, I was putting a saddle on a few and before I knew it I was in that saddle riding a horse that had never been ridden before.

I admit I had some nervous moments, but I was never thrown off. It taught me that developing genuine trust early is very important and is needed by all involved. Nothing of any real value happens without it.

R&I: What about this work do you find the most fulfilling or rewarding?

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Setting very aggressive goals and then meeting and exceeding those goals with a team. Sharing team victories is the ultimate reward.

R&I: What is the most unusual/interesting place you have ever visited?

Disney World. The sheer size of the place is awe inspiring. And everything works like a finely tuned clock.

There is a reason that hospitality companies send their people there to be trained on guest service. Disney World does it better than anyone else.

As a hospitality executive, I always learn something new whenever I am there.

James Cunningham, vice president, enterprise risk management, Pinnacle Entertainment, Inc.

The risks that Disney World faces are very similar to mine — on a much larger scale. They are complex and across the board. From liability for the millions of people they host as their guests each year, to the physical location of the park, to their vendor partnerships; their approach to risk management has been and continues to be innovative and a model that I learn from and I think there are lessons there for everybody.

R&I: What is the risk management community doing right?

We are doing a much better job of getting involved in a meaningful way in our daily operations and demonstrating genuine value to our organizations.

R&I: What could the risk management community be doing a better job of?

Educating and promoting the career with young people.

R&I: What have you accomplished that you are proudest of?

Being able to tell the Pinnacle story. It’s a great one and it wasn’t being told. I believe that the insurance markets now understand who we are and what we stand for.

R&I: Who is your mentor and why?

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John Matthews, who is now retired, formerly with Aon and Caesar’s Palace. John is an exceptional leader who demonstrated the value of putting a top-shelf team together and then letting them do their best work. I model my management style after him.

R&I: What is your favorite book or movie?

I read mostly biographies and autobiographies. I like to read how successful people became successful by overcoming their own obstacles. Jay Leno, Jack Welch, Bill Harrah, etc. I also enjoyed the book and movie “Money Ball.”

R&I: What is your favorite drink?

Ice water when it’s hot, coffee when it’s cold, and an adult beverage when it’s called for.

R&I: What does your family think you do?

In my family, I’m the “Safety Geek.”

R&I:  What’s your favorite restaurant?

Vegas is a world-class restaurant town. No matter what you are hungry for, you can find it here. I have a few favorites that are my “go-to’s,” depending on the mood and who I am with.

If you’re in town, you should try to have at least one meal off the strip. For that, I would suggest you get reservations (you’ll need them) at Herbs and Rye. It’s a great little restaurant that is always lively. The food is tremendous, and the service is always on point. They make hand-crafted cocktails that are amazing.

My favorite Mexican restaurant is Lindo Michoacan. There are three in town, and I prefer the one in Henderson as it has the best view of the valley. For seafood, you can never go wrong with Joe’s in Caesar’s Palace.




Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]