Managing Carrier Relationships
Robert Jevens of Equity Risk Partners helped secure a “buy-side” representations and warranties policy to close a deal, as the seller was an employee stock ownership plan trust, leaving the buyer no recourse if a breach subsequently occurred.
Moreover, the buyer wanted coverage that included the enhanced definition of loss on a target that did not have audited financials.
Jevens negotiated a policy that provided policy language for the coverage sought, including the loss enhancements.
He also worked with the insurer to limit a sensitive exclusion that had the potential to kill the deal.
Ultimately, Jevens assisted the buyer in procuring coverage that gave the principals enough comfort to move forward and close the transaction.
“We’ve worked with Rob on a number of transactions, and he does the best job of anybody being responsive and getting carriers to do the same,” said a private equity client.
“His specialty is rep and warranty insurance, which always operates under a tight timeframe — everything is urgent. Rob does a very good job of getting carriers to meet our deadlines.”
Said another private investment client: “We tend to be very detail-oriented and require a heavy amount of customization in our contracts, so it was a bit of an arduous process negotiating with the underwriters. I think Rob’s relationship with the underwriters was what helped get them to pay attention to us and hopefully build a relationship that will persist through future deals.”
A Patient Adviser
Nick Kalist and his team developed a directors and officers program for a master limited partnership’s initial public offering.
Because of the close relationship between the MLP and the general partnership, there were a number of concerns for the potential board members, including exposure during the IPO road show due to the public filing requirement.
Kalist and his team conducted underwriter meetings with multiple carriers and worked to manuscript language to address the directors’ concerns.
A private equity client said that Kalist and his team continually help the firm with coverage issues during due diligence on potential investments and numerous tack-on acquisitions, on top of insurance renewals for its current portfolio of 10 companies worldwide.
“In addition, we are always exploring new areas of coverage such as product recall insurance and cyber insurance which Nick and his team have patiently educated and informed us of the pros and cons of each area of coverage,” the client said.
For another private equity client, Kalist prepared a representations and warranties policy for a very complex deal structure and performed a product liability assessment that mirrored the unique risk profile of the target.
Once the deal was completed, Kalist advised the acquired company’s human resource managers on how he could save them money while at the same time getting them greater coverage.
“All the due diligence work was pro bono as he valued the relationship with our firm and knew it was more important than trying to squeeze every penny of revenue out of this transaction,” the client said.
In a Word, Responsiveness
Tony Marcon’s clients know that “responsiveness, responsiveness, responsiveness,” is his mantra for his role as a broker.
That means not only always being on call for clients, but also responding to requests with honest goals and objectives that meet his clients’ timeframe and needs.
One of Marcon’s private equity clients undertook a “roll up” in the aerospace industry, purchasing four separate companies within a 10-month period.
It was the job of Marcon and his team to put in place in a timely manner a consolidated insurance program that would protect all aspects of the company, including an employee benefits program. A single program was established that saved the client money and covered previously uncovered gaps.
Marcon and his team at Equity Risk Partners focus 100 percent on the needs of private equity firms and their portfolio companies, working to recommend solutions to the issues facing them.
“Tony Marcon has been the overall relationship guy with our company,” said a client at a federal government contracting company. “He does a really good job of keeping abreast of the development of our firm and our industry and he’s a pretty valued resource to the company.”
“Tony Marcon is very responsive — he gets his team geared up to help us,” said another client at a private investment firm.
An Exceptional Professional
When one of Michael O’Neill’s large publicly traded private equity clients expressed interest in restructuring its program, O’Neill and his team determined that it was best to bifurcate the existing program into two towers to address the specific exposures of two constituencies — the funds and the public company’s board.
This would eliminate a potential conflict of interest in the event a claim against one of its funds eroded all of the limits for the public company’s board of directors, or vice versa.
O’Neill worked to ensure that no gaps were created between the two new policies, or between the new policies and the expiring policy.
To ensure ongoing performance, O’Neill made sure a “renewal transition provision” was included. There was minimal addition of exclusions between the two new policies, insurance carriers between the two new programs remained consistent and there was no anti-stacking provision and no “common claim” tie-ins.
The client ended up with a new $255 million general partnership liability program and a new $200 million directors and officers program designed specifically for their public securities.
“Michael O’Neill is constantly keeping us informed of changing trends in the market and how these changes could impact our coverage whether positively or negatively,” said Ed Dailey, principal at Colony Capital LLC.
“Mike is an exceptional management liability insurance professional,” said a client at a specialty retailing company. “He’s very knowledgeable, responsive, and adds tremendous value to our organization in this space.”
Mike Todorovich II led a team to complete a consolidation of the insurance programs, benefits and 401(k) plans of a multibillion-dollar group of companies owned by the private equity firm American Industrial Partners.
Todorovich not only led the integration of the benefits and insurance plans, but also helped marry cultural dynamics and consolidate overall strategy of four separate $200 million-plus revenue companies with their own operating agendas and operating philosophies.
“We view Mike and Lockton as an extension of our firm,” said Paul Bamatter, partner and CFO at American Industrial Partners. “He is familiar with every aspect of our company and understands the business of all of our portfolio companies, which employ 15,000 people worldwide.”
For another private equity client, Todorovich led a team to construct a representations and warranties insurance solution that allowed the client to close a deal.
He also led a team to create an all new insurance program, benefits and 401(k) plans for a business carved out of a larger holding company, generating meaningful savings for the newly formed entity.
Todorovich’s clients know he provides complete transparency and brutal candor when it comes to providing advice, and often refutes the theory that consolidation of an insurance buy across a firm’s entire portfolio can create meaningful cost savings.
You Won’t Go Back
Symphony Technology Group’s recent deal for a unit of a U.K. multinational company required new insurance, benefits and pension schemes, but the seller was reluctant to provide information about exposures to catastrophic loss.
Equity Risk Partners’ Josh Warren got all lines of coverage placed with competitive rates, and worked closely with a U.K. benefits contact to coordinate the transfer of the target company’s pension schemes.
He then coordinated meetings with local contacts in every country where the company operated, which netted information that wasn’t provided during due diligence.
In some cases, decisions made when coverage was bound had to be changed to address what his team learned.
“Equity Risk Partners was not receiving any traditional underwriting fees as the firm does not write insurance in those geographies,” said Adam Hendricks, vice president at Symphony Technology Group. “Josh went over and beyond to coordinate the effort of local partner firms in each country to ensure we set up the appropriate coverages.”
A client that provides interior accommodations and systems to the marine industry said his company was purchased by a private equity firm that required his company to use Equity Risk Partners.
“I fought tooth and nail because we had the same broker for years, but today I wouldn’t switch back,” the client said. “Josh and his team have been extremely responsive, getting us accurate information quickly.
During renewals, they prepare complete and thorough proposals for review and they compete for us for the best coverages.”