2.2
Insurance Trends in Private Equity:
Deal Structure
Deal Structure Will Impact Insurance and Benefits Strategy
PE firms continue to look at alternative deal structures to get deals across the finish line, a trend we expect will persist in 2026. Add-on acquisitions (including sizeable ones), take-privates, corporate carveouts/divestitures, and growth equity deals continue to be attractive ways to put capital to work. Each of these transaction structures involves a different skill set in terms of insurance and employee benefits due diligence, as well as post-acquisition brokerage implementation strategy.
For example, in a take-private transaction, the management liability (directors & officers liability) program coverage structure and cost will completely change. The existing public company D&O program will be placed into runoff, and a new, go-forward private company management liability program will need to be implemented. The limit and retention structure, and overall coverage, of a public versus private company management liability program can vary significantly, and runoff terms/conditions and pricing can be renegotiated prior to closing. This could impact the company’s cash flow at closing by hundreds of thousands, if not millions, of dollars.
In a take-private transaction, it is critical to engage a specialty insurance advisor who works directly in the PE space. A skilled advisor can work on the necessary tail coverages while simultaneously structuring a go-forward management liability program that is appropriate for the go-forward entity under PE ownership. They must also be able to perform due diligence on the other property, casualty, and employee benefits coverages.
As another example, in an asset or carve-out transaction, the firm will need to implement an entirely new property, casualty, and management liability program at close. Depending on the nature of the transaction structure, the diligence strategy and go-forward implementation can vary widely. It’s critical to engage an insurance advisor early and often in these processes to ensure nothing is overlooked.
Middle-market PE or growth equity transactions have specific implications on risk management and insurance programs pre-close, at close, and post-close. Check out our three-part series on transactional structures.
