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Sharpening Risk Management for Family Offices and Other Private Equity Source

Sep 14, 2020 Decorative image

With an already troublesome economy buffeted by the double whammy of COVID-19 and social unrest, many otherwise healthy companies struggle to find their footing. Whether it’s a need for a significant capital infusion to provide a bridge to more stable times, or a recognition that this is an excellent time to capture opportunities for competitive advantages, many of these companies are in search of private funding.

That creates tremendous opportunities for private equity sources and family offices that have capital ready to invest. At the same time, the instability of the economy and the potential pitfalls lurking in companies have been increasing awareness of the value and importance of having strategic risk management counsel as part of the investor’s team of trusted advisers. The role of risk management counsel is to look beyond valuation and operational issues to identify factors that may significantly reduce the anticipated return on investment, and then to devise strategies to transfer, eliminate, or otherwise mitigate the risks.

As corporate structures and deals become more complex, gaining an independent view of the inherent risks before proceeding with decisions is prudent. That’s particularly true for family offices, whose long-term goal is preservation and growth of the family’s financial legacy. Whether they’re seeking such growth through investments in commercial organizations or preparing to make significant outlays to support philanthropic objectives, they need to protect their assets. Insurance offers one opportunity, but few commercial insurance brokers have experience in serving the unique needs of family offices and may not even be able to communicate effectively with them.

While family offices have great confidence in their business managers or other professionals they have entrusted to protect assets, those professionals may not be completely comfortable with complex transactions or familiar with all the risks associated with a particular company or industry.

That’s where counsel from professionals who specialize in risk management issues, have deep experience in both commercial and private insurance programs, and are familiar with the challenges and nuances of the family office environment becomes critically important. For example, the family may be considering an investment in a company whose industry involves inherent environmental issues. Experienced risk management counsel will examine the specific risks associated with the company’s business and can identify and recommend strategies to transfer the exposure outside of the deal. They’ll work with the family’s attorneys to protect both the investment and the assets.

Hylant’s M&A and Transaction Solutions team brings professionals with extensive corporate, private equity, and family office experience together to assess and help structure transactions. The team employs its comprehensive risk analysis to both quantitatively and qualitatively identify and deal with all of the potential risks. They can draw upon Hylant’s expertise to build insurance solutions and place policies that transfer or mitigate risk.

This strategic process is every bit as useful for private equity firms and other sources of capital who seek effective ways to assess, limit, and transfer risks associated with transactions. The Hylant team’s unique composition of experienced professionals and the approach they employ informs decision-making and strengthens investor confidence.

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