Dealing with complexity
An Engineering Contractor near the end of a transforming MBO. Revenue and profits were extremely ‘lumpy’ due to contract timings.
The MBO had a complex structure with two operating companies and two investment companies, all four with executive shareholders.
The lumpy profits created two valuation issues: the Insurer needed comfort that the insurance value was not too high; the shareholders needed comfort they were not locked into too low a price.
FAB secured Share Insurance based on a £16m valuation.
The policies supported inter-locking Cross Option Agreements for each of four companies and eight executive shareholdings.
The Option Agreements were based on the FAB template and allowed for flexibility in valuation after an initial period of three years.
Sums Assured: £16 million
Lives Assured: 4