Texas residents who own businesses and are considering merging with or acquiring another company should be aware that there are multiple insurance issues that must be addressed. Before signing a merger and acquisition deal, business owners should consult with a transactional attorney to understand the various insurance issues and how to avoid being burdened with acquired liabilities.
In order to identify uncovered liabilities in a target company, it will be necessary to closely examine its insurance policies. A thorough review of any of the target business's contracts that may provide indemnification should also be conducted. This is highly important because the actual cost or value of the transaction can be affected by whether there are insurance policies in place for any identified or potential liabilities.
In situations in which uninsured liabilities are identified, the parties may need to modify the purchase price accordingly. Another option is to have the seller agree to indemnify the purchasers as necessary.
When identifying uninsured liabilities, purchasers should determine whether relevant insurance policies are in place for the target company's most significant liability exposures. Buyers should also analyze the target business's claims history to find out if there is a possibility that settled liabilities may be repeated. If they are, the buyer should determine if the liabilities can be covered under the current insurance programs.
An attorney who practices business or commercial law can help protect the interests and rights of business owners who are purchasing, merging, or selling enterprises. A lawyer may also assist with or oversee various commercial transactions, including business dissolutions, mergers and acquisitions, and reverse mergers. Drafting and reviewing business contracts, litigating or negotiating to address breaches of business contracts, and devising exit strategies are additional services frequently offered by a business attorney.