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Bringing a New Level of Risk Management Expertise to Middle-Market Companies

Jul 23, 2020 Decorative image

As the volatility and complexity of investment and financial markets continue to increase, the world’s largest companies have embraced risk management as a central element of strategic planning. Leaders of those companies have drawn upon the sophisticated risk management expertise available to them to ensure the success of strategic transactions such as mergers and acquisitions (M&A).

Top managers at middle-market companies generally haven’t had the same level of awareness of these resources, but that has been changing as people who have gained experience in well-known enterprises transition into leadership roles in the smaller firms. They’re accustomed to developing growth plans and making decisions informed by data, finance and risk issues.

It’s an important transformation, because even though smaller companies lack the scope and capitalization of Fortune 1000 members, many of the challenges they face are fundamentally the same. For example, a CFO at a $30 million company may be grappling with the identical transaction-related technical tax issue that’s vexing her counterpart at a $3 billion company. While the two financial leaders are working with different numbers of digits, both would benefit from the same counsel. It comes down to a question of whether that counsel is accessible and affordable to growing firms.

Using Risk Analysis to Design Investment Strategies

Recognizing that the nation’s roughly 235,000 middle-market companies have long been underserved when it comes to risk management expertise and given the growing importance of sophisticated risk management for strategic transactions, Hylant has enhanced the capabilities of its M&A and Transaction Solutions team. The team focuses on taking a holistic view to reduce uncertainty during complex transactions, protect the safety of investments and maximize financial returns.

Unlike brokers whose primary motivation is insurance placement, the Hylant M&A and Transaction Solutions team brings professionals with extensive corporate experience together to study a company’s needs and recommend strategies to transfer or mitigate risk. The team employs its comprehensive risk analysis to evaluate the company’s risks and how it is applying its human and financial resources to address those risks. Instead of taking a limited view of risk built around compliance, the team drills down deeply to discover opportunities for meaningful changes. It’s a strategic process that breaks down internal silos to both quantitatively and qualitatively identify and deal with all of the potential risks.

Consider the following. A company is considering an acquisition. The team will use a risk-focused due diligence process to analyze the impacts an acquirer should be aware of, including those related to property insurance, employee benefits, retirement plans, key employee compensation or life insurance. They can draw upon Hylant’s expertise to build insurance solutions and place policies that effectively transfer risk to third-party insurers. The team can also design bespoke forms of insurance capital to facilitate transactions when other forms of capital are unavailable.

Team members are also accustomed to working with all the types of stakeholders involved with transactions, from the management team, to the board, to outside sources of funding and other advisers, so they can help clients communicate more effectively.

While insurance may play a role in their recommendations, instead of treating it as an expense, the team will evaluate coverage as an investment decision. After all, insurance decisions affect the company’s financial capacity and managers need to consider the internal rate of return on what they spend.

Learn More

Middle-market companies that hope to grow can learn valuable lessons from Wall Street’s giants. The growing emphasis on risk management as a leadership function and access to new risk management tools bring a new perspective to decision-making related to special transactions and everyday operations. The Hylant M&A and Transaction Solutions team gives companies access to that expertise when they need it most.

Learn more about how we help companies like yours reduce the uncertainty of complex transactions, protect their investments and enhance their returns.

The above information does not constitute advice. Always contact your insurance broker or trusted adviser for insurance-related questions.

Joe Herman, SVP, Transactional Risk, Hylant M&A Transaction Solutions

Kip Irle, SVP, Strategic Risk Advisor, Alternative Risk, Hylant M&A Transaction Solutions