Due Diligence Insurance Market Update: January 2025

Due Diligence Market Update
Abby Hodge - Bellrock Advisory

Abby Hodge

In the last 18 months, the mergers and acquisition market has slowed down drastically. According to Herbert Smith Freehills, a conservative $49.2B worth of transactions occurred in FY24 as deal makers were cautious with their capital citing inflation, interest rates, political elections and other risks driving market uncertainty.

However, news over the past few months suggests dealmakers in Australia are starting to feel more confident and assured about their transactions. There are early signs of an upswing in deal activity with sizeable mid-market deals announced, including a few mega deals valued at around $1B.
Private equity deals, particularly within the healthcare, technology and renewal energy sectors continue to see increased appetite within the market. Coupled with this, international deal makers from Europe and Japan appear poised to pounce on investment opportunities.

As the number of ASX-listed firms continues to decline and the number of private M&A prospects rise, the balance may tip in favour of more private enterprises when compared to public transactions, especially for private equity purchasers.

The outlook for FY25 is not without its challenges. Changes in governments both domestically and abroad, continuing high interest rates, and global geopolitical tensions all present obstacles. However, deal makers are optimistic about the opportunities ahead and are looking forward to driving growth in those business environments which are actively evolving.

A critical path to facilitate the growth of M&A activity is the necessity of insurance due diligence. M&A transactions are among the most important and complex transactions a corporation may engage in. Every M&A transaction, whether motivated by expansion or market infiltration, involves a number of risks, and insurance plays an important role in managing these risks and giving peace of mind to deal parties.

Insurance due diligence is an often overlooked but critical element of the M&A process. It will not halt the transaction but will often uncover hidden liabilities, change the EBIDTA or buyer’s multiple, identify gaps in insurance coverage, quantify cost, and support integration post Financial Close. See our Product Fundamentals article here for further details.

For any transaction related exposures, whether that be acquisition, investment, divestment, merger, distressed, carve out and the like, please contact Bellrock’s Transaction Risk team for a bespoke solution to your M&A needs.

 


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