ACA Cast

A Closer Look at M&As

May 18, 2020 ACA International
ACA Cast
A Closer Look at M&As
Show Notes Transcript

Collectors Insurance Agency pros discuss ways M&As impact your bonds, licensing and insurance.

If a merger or acquisition is in your company’s future, then this episode of ACA Cast titled, “A Closer Look at M&As” is must listen-to podcast for you and your staff. Tune in to hear Collectors Insurance Agency Licensing Manager Angela Butera and Sales Manager Dereck Tessmer answer tough questions about confidentiality and notification requirements associated with all merger and acquisition activities. 

This podcast is sponsored by CT Corporation. CT Corporation is the leading provider of corporate business compliance solutions in the US and over 150 countries around the globe. Drawing on more than a century of experience, its offerings enable companies to effectively manage statutory representation, service of process, annual report filings and business licenses as required by state and federal law. For more information, visit ctcorporation.com 
(Angela Butera is pictured)

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ACA Cast: A Closer Look at M&As

Collectors Insurance Agency pros discuss ways M&As impact your bonds, licensing and insurance.

 

If a merger or acquisition is in your company’s future, then this episode of ACA Cast titled, “A Closer Look at M&As” is must listen-to podcast for you and your staff. Tune in to hear Collectors Insurance Agency Licensing Manager Angela Butera and Sales Manager Dereck Tessmer answer tough questions about confidentiality and notification requirements associated with all merger and acquisition activities. 

This podcast is sponsored by CT Corporation. CT Corporation is the leading provider of corporate business compliance solutions in the US and over 150 countries around the globe. Drawing on more than a century of experience, its offerings enable companies to effectively manage statutory representation, service of process, annual report filings and business licenses as required by state and federal law. For more information, visit ctcorporation.com. 

 

Transcript:

 

This ACA Cast will be about discussing Mergers and Acquisitions; how they affect your Bonds, Licensing and Insurance.

With Collectors Insurance Agency Licensing Manager, Angela Butera, and Sales Manager, Dereck Tessmer.

This podcast is sponsored by CT Corporation. CT Corporation is the leading provider of corporate business compliance solutions in the US and over 150 countries around the globe. Drawing on more than a century of experience, its offerings enable companies to effectively manage statutory representation, service of process, annual report filings and business licenses as required by state and federal law. For more information, visit ctcorporation.com. 

 

Question – Does an Acquisition/Merger affect the agencies licensing/bonds?

Answer – Angela Butera: Yes, it will. How it affects your filings both Certificate and Licenses, will depend on the type of changes. There are several different types of changes from Ownership to Address.

The surety company that issues your Bonds will need to be notified of the changes. They will need to approve the changes, so your required Bonds for Licensing remain in place.

One thing we hear from agencies is “Can we just update at renewal time?” Unfortunately, not in this case. Timely notifications are very important, and lack of notification may result in penalties, fines and in some cases denial/revocation of licensure. Some state Licenses are tied to the ownership, once that ownership change occurs, a License may no longer be valid. This means, until a new License is in place, business activity should cease per state requirements.

 

Question - Will the agency have to obtain new licenses/bonds when they have an Ownership Change, Merger or Acquisition? 

Answer – Angela Butera: The agency will need to review each state Certificate and License to determine what is required. For the most part you will see only the need for an amendment to the filings currently in place. However, each change is different for each agency and it may result in brand new filings. 

One factor that affects whether a new License is required would be the ownership change percentage. Some states that require a brand-new License may only require a new License when the change is 50% or more. In this instance you may also find a brand-new Bond is required to go with the new License application. 

Also, if the purchased agency will be dissolved or absorbed into the purchasing agency, you may not have a need for amendments, but instead need to withdraw the filings and cancel the Bond. 

 

Question - Who is responsible for notifying the states of changes made?

Answer—Angela Butera: Typically this would be the purchasing agency, when they will leave the agency purchased in place. Meaning, if an agency purchased another, and wished to leave that agency open at that location, under that name, then the amendments would be filed on the Certificates and Licenses.

 

Question:  What is one thing you would stress to members to do if they are going through or thinking about a merger or acquisition?

Answer – Dereck Tessmer:  The number one thing that I would stress is to reach out to their insurance agent right away and discuss the situation with them.  

Every situation is different.  Are you selling the company to a family, merging with a separate entity, or selling the company to a long time individual?  There are many factors that will determine what the best route will be to move forward.

Now there may not be anything needed to be done to the policies right away but discussing the situation with your agent will allow the insured to understand their options.  

The same is true when purchasing a company.  A change to the policy may or may not require a change be made to the insurance coverages, depending upon the type of insurance coverage, and the type of purchase that will be occurring.  Is the policy a claims made or an occurrence policy? 

For example, the errors and omissions coverage is a claims made policy.  An extended reporting period may need to be purchased, by the seller, due to contracts.   Or the seller may want to purchase the ERP for their own peace of mind.  Discussing the situation with your agent right away will allow you to understand your options and determine the best route to move forward.

 

Question: Besides discussing the situation with their agent right away is there anything else you feel it is important to share?

Answer – Dereck Tessmer:  I think it is important for everyone to understand that the information provide to your insurance agent is kept confidential.  I tend to hear that an insured did not reach out to us sooner because they were not sure if the sale was going to go through and didn’t want their employees to know about it.  At companies where there are a few individuals handling the insurance coverages, it is helpful to advise the agent that your employees are not aware of the and confirm with the agent who they can talk to about the manner.  Otherwise, it should be known that the agent will not be sharing this information.