Service to be provided:

Pinnacle consultants will perform due diligence on a company being considered for acquisition, merger or divestiture, in order to evaluate the potential liabilities associated with the entity in question. We will not only identify the liabilities associated with the target entity, but will also review and comment upon the adequacy of the target firm's insurance risk management program, with regard to adequacy of coverage terms, premiums, and retentions. Should gaps in coverage be determined, or uninsured or under-funded liabilities be determined, they will be brought to your attention so that a decision can be made as to how or if such a discovery might affect the purchase price. Further, Pinnacle will also comment upon the potential cost savings associated with program integration.

Pinnacle consultants will also determine the existence of accruals applicable to self-insured liabilities in addition to accruals required by SOP 87-1 (Accounting for Incurred-But-Not-Reported Liabilities) or FAS-5.

Why should such a service be considered?

The mergers and acquisitions process at times can be highly competitive and the winner tends to be the organization that knows the most about the target company. Insurance risk management should not be excluded from the due diligence process. Failure to identify uninsured liabilities and/or underfunded liabilities can be the difference between a highly successful acquisition and an unsuccessful one. Furthermore, our experience has shown that integrating the target company's insurance risk management program into the acquirer's, can many times generate savings of upwards of 40%. In addition, the new combined organization may now be able to consider risk-financing techniques that were not cost-effective before, hence, generating additional savings.

Insurance risk management needs to be part of the overall due diligence plan in order to eliminate any unpleasant surprises and to more accurately project potential savings post acquisition.