Due Diligence

CRS provides full risk management and insurance due diligence for target acquisitions or divestitures. We work in unison with our client's working party, and focus on the contractual risk management issues created by the transaction (i.e., stock, purchase, member interest) as well as liabilities being assumed. We work with accounting partners on insurance and self-insurance expenses and accruals which may impact the quality of earnings analysis or require adjustments to EBITDA and purchase price. We also collaborate with our client's legal partners on sections within the purchase agreement that illustrate each party's exposures and insurance responsibilities for pre-close and post-close events.

CRS can also collect historical data on the target's insurance and risk management programs (if applicable) to both assess the integrity of these programs and to archive policies in the event that a claim arises after closing from a pre-close incident. We work closely with our client's brokerage partner on risk finance options to address transactional issues (i.e., D&O run-off, reps & warranties, pollution, etc.) and to negotiate a post-close insurance program. A variety of options can be provided to give the new management team the opportunity to reduce fixed expense through a reasonable assumption of manageable risk.

Specific due diligence tasks, which together facilitate a clean and profitable investment (or exit) strategy, typically include:

• Analyzing insurance policies for coverage deficiencies, adequacy of limits and deductibles.
• Conducting a financial and market analysis of insurance carriers currently on risk.
• Identifying outstanding Letters of Credit or escrow deposits that may be reduced or consolidated post-close as well as new collateral needed under the revolver.
• Collaborating on the valuation of all book entries relating to reserve accruals for deductibles or self-insurance plans, including a detailed review of outstanding claims and settlement strategies.
• Identifying resources (staff, brokers, advisors, etc.) that may be required post-close to efficiently manage risk and reduce the potential for loss.
• Analyzing the target's exposure to loss(es) and exploring the various risk management techniques available to manage risk, including current business interruption exposure, coverage level, and continuity planning.
• Evaluating the target's procedures and processes to ensure sound risk management policy.
• Reviewing contractual risk management procedures relative to leases, supplier & vendor contracts, bid documents, certificate issuance and other legal documents where liabilities are assumed or transferred.
• Evaluating target's insurers, brokers, loss control, claims management and various other vendors for effectiveness and compliance to best practices; evaluating the level of remuneration to all parties and remuneration disclosure.
• Providing a post-close budget of insurance and risk management impacts, benchmarking the target against its peer group; identifying and outlining the advantages and disadvantages of restructuring current insurance policies, if applicable.

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