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CFC launches new transaction liability to unlock $8bn micro M&A market

June 08, 2021

CFC announced the launch of a new transaction liability solution aimed at unlocking the micro segment of the M&A market.

CFC state this segment represents the largest volume of M&A deals and the firm estimates it to be worth close to $8bn in gross written premium (GWP), yet it has been all but ignored by the insurance market to date.

The first-to-market transaction liability solution is set to address this significant opportunity for brokers. Its new Private Enterprise policy insures the sellers of small businesses with an enterprise value of between $250,000 and $10mn for damages and defence costs resulting from a claim against the seller for a breach of a representation or warranty (R&W) in the purchase agreement.

Unlike other transaction liability policies which typically provide a policy limit of around 10% of enterprise value (EV), the Private Enterprise policy insures the full indemnity given by sellers enabling a full 100% EV indemnity to be provided. The product also offers a fixed wording and streamlined underwriting to enable brokers who may not have extensive M&A experience secure coverage for their clients quickly and efficiently.

Angus Marshall, head of transaction liability, CFC said: “We estimate there to be nearly half a million SME M&A transactions a year globally, around ten times the number of deals in the current transaction liability addressable market. This important insurance cover has been widely adopted in the mid-market, and we believe the micro segment represents the next sector of growth.”

The sellers of these businesses have often built them from nothing; they’ve worked hard to grow their value and want to protect that value when it comes to a sale. They need insurance that is relevant to smaller businesses like them, at a price they can afford and that is simple to understand.”

Marshall concludes: “With over 50,000 SME transactions taking place in UK alone on average, there is a significant market to address and an opportunity for brokers to provide a vitally important service to their small business clients looking to realise the value that they have worked hard to build. We’re proud to have developed the solution they need.”