A business for sale will typically be valued at a multiple of its annual earnings with a target price, even for a small business, running into hundreds of thousands of pounds, up to multi millions for larger sales. Purchasers can often find that an ‘equity gap’ arises in trying to achieve the target price required in acquisition, often leading to the need to source several layers of funding which can be increasingly costly, or further equity partners thereby diluting the equity for the purchaser.

Deferring part of the purchase price can alleviate this problem but the vendor needs to have a guarantee that repayments will be met and this can be provided in the form of Deferred Consideration Insurance.


Why use Deferred Consideration Insurance?

Introducing Deferred Consideration Insurance to transactions enables the following:

Deferred Consideration Insurance can be used in the following types of transaction:

	Buy in management buy out	BIMBO
	Management buy out	MBO
	Management buy in	MBI
	Share buy back	SBB
	Public to private	P2P
	Secondary buy out	SBO

Due to the increasing complexity in the structuring of acquisitions, it is important that the principle of deferred consideration is introduced as early as possible to enable the vendor and purchaser to agree deferral and allow the insurer to fully assess the proposed transaction to ensure a guarantee can be issued.