DealLawyers.com Blog

September 16, 2003

This is my first attempt

This is my first attempt at a WSJ’s Mossberg Solutions-like product/service review. This one’s on risk management due diligence.

Let’s imagine that you’re representing a buyer of a business. How good would you look in your client’s eye if you’re able to get a nationally-recognized risk management group to conduct due diligence on target’s insurance and other risk management matters – FOR FREE?

For years, my college tennis buddy, Dave Lukens (dlukens@lockton,com) of insurance brokers Lockton Companies (www.lockton.com), told me about his M&A Group based in NYC that – for no charge – analyzes target’s insurance policies and other risk management programs (including matters like coverages, claims, retentions, reserves, etc…) and produces a report to the buyer on Lockton’s findings and recommendations. (Of course, these guys are doing it to get their foot in the door but there’s no obligation to buy). They mainly offer this service to support Lockton’s buyout fund customers.

On a recent deal, the moons lined up (i.e., I finally remembered what Dave was telling me), and I recommended Lockton to perform the risk management due diligence on target. On (very) short notice, these guys dove into the data room, jumped on conference calls with us, and otherwise served as the client’s risk management department . On this deal, environmental liabilities was a particular concern and the Lockton guys were able to get their environmental specialists involved at a moment’s notice. In all, we got the expert analysis that we needed, got it fast, and got it for free.

Even if your client has a full-blown risk management dept, wouldn’t it be helpful to benefit from another expert’s investigation, analysis, and judgment – without cost to the client?

I wouldn’t be surprised if other insurance brokers offered this service but I’m certainly going to remember this for future deals.