Mergers & Acquistions

Even if you do not have IP rights, if you make, use or sell products or services, you may be infringing third party IP rights. Gallagher has developed an IP Insurance framework to support businesses and Mergers and Acquisitions (M&A).

Three types of IP Insurance:

  • IP invalidity
  • IP pursuit
  • IP contingent liability

IP invalidity

Covers legal expenses and damages arising from IP infringement allegations, including indemnification for licensees.

Useful for M&A because it covers historic and prospective infringements, regardless of seller awareness.

IP pursuit

Supports insured’s legal costs for bringing an action against a third party for IP infringement and invalidity.

M&A tip: the target might have IP infringement claims excluded from their underlying General Liability, Directors’ and Officers’ (D&O) or Professional Indemnity insurance policies. An IP insurance policy can be positioned to plug this gap.

For distressed M&A the seller often provides very limited or no warranties. An IP policy or synthetic Warranty and Indemnity (W&I) warranties can enhance or replace traditional seller warranties.

Typical IP invalidity and/or pursuit insurance structure:
Policy Period: annual
Limit: GBP 100k to GBP5m+ (aggregate)
Retention: GBP15k to GBP500k+ (each and every claim)
Co-insurance: 10-25% (for any amount excess of retention)
Premium: 1.5-3% of Limit (minimum GBP5k)
Territorial Scope: worldwide
Coverage: 1. IP rights defence
2. IP rights pursuit
3. Loss of IP rights or future profit
Historic infringement cover for additional premium

IP contingent liability

IP infringement and pursuit policies cover events that were not known at the start of the policy. Contingent liability insurance covers known events where there is an unknown outcome.

Covers one-off legal, judicial and legislative IP risks that may inhibit or prevent completion of transactions, or present undue risk exposure to involved parties.

M&A tip: useful as an alternative for indemnity escrows.

IP contingent liability metrics
Limit: up to GBP100m
Period: up to ten years
Policy form: manuscript
Retention: 5-30% of limit

These are brief product descriptions only. Please refer to the policy documentation paying particular attention to the terms and conditions, exclusions, warranties, subjectivities, excesses and any endorsements.