Page 12 - Healthcare PE Pitchbook 34210
P. 12
Pre-close due diligence services
Property and Casualty analysis
INSURANCE POLICIES, RISKS, AND EXPOSURES FINANCIAL ASSESSMENT EFFICACY OF RISK MANAGEMENT PROGRAM
• Exposures — analyze client’s exposure to loss • Annual insurance expense — identify current and estimate • Internal risk management structure — review people and
• Claims/losses — review pending and closed claims/ post-closing costs, including ixed costs for premiums and resources dedicated to manage total cost of risk
variable costs for retained liabilities
litigation • Policies and procedures — review and comment on risk
• Current insurance — summarize current terms, premiums, • Incremental costs — estimate premiums for additional management policies and procedures
limits, and deductibles lines of coverage and/or increased limits • Management of service providers — review outside vendor
• Go-forward insurance — identify uninsured risks and related • One-time transaction-related costs — estimate run-off contracts and expenses, including brokers and third-party
administrators
premiums for policies with change in control provisions (e.g.,
risk transfer alternatives Directors and Oficers Liability) and transaction risk policies
• Purchase and sale agreement — review the insurance- (e.g., rep and warranty) • Loss prevention and claim management — review pre- and
post-loss policies and procedures
related sections of proposed transaction document
• Balance sheet accruals — compare client’s current accrual
to actuarially based estimate for historic retained losses
• Collateral — identify and comment on current, historic, and
estimated post-close collateral/letter of credit requirements
• Cash low — if applicable, provide cash analysis for retained
losses
Employee Beneits analysis
OVERVIEW OF EMPLOYEE BENEFIT PLANS FINANCIAL CONSIDERATIONS TRANSACTION RELATED AND POST-CLOSING
ASSESSMENT
• Current employee beneits — review plan documents, • Beneit plan expense — identify current and estimate • Purchase and sale agreement — review the employee
funding mechanisms, and governmental ilings for health, post-closing costs, including ixed costs for premiums/ beneits and employee-related sections of proposed
welfare, and retirement plans to summarize plan provisions, administration and variable costs for self-funded claims transaction document and comment accordingly
premiums, claims, and potential compliance concerns liabilities and pension and post-retirement, and post • Coordination of internal and external resources — work
employment obligations
• Evaluate portability — identify potential portability issues closely with actuarial services, executive beneits, and
of plans and comment on potential impact to successor • Balance sheet accruals — evaluation of accounting international beneits to provide comprehensive results
employer and the employees accruals compared to IBNR calculations, pension, post- • Transition to service teams — provide information and
• Severance and employment agreements — review of retirement, and post-employment obligations guidance to service teams, speciically with regard to post-
agreements to evaluate future liabilities of any employee • Allocations — identify and comment on accuracy of closing requirements to satisfy terms of the purchase and
beneits continuation beyond COBRA actual expenses as a stand-alone entity when compared to sale agreement
allocations from parent company
• Documents of inluence — review of documents such • Program cost eficiencies — review and evaluate the
as collective bargaining agreements, multi-employer • Cash at closing — identify any required cash outlow current program and outline options which can be leveraged
agreements, and other potential inluences on employee resulting from the transaction or new plan set up beyond to reduce expense
beneit plans ordinary expense (e.g., seed money)
Lockton Private Equity/Healthcare pitchbook 12 Lockton Companies
Property and Casualty analysis
INSURANCE POLICIES, RISKS, AND EXPOSURES FINANCIAL ASSESSMENT EFFICACY OF RISK MANAGEMENT PROGRAM
• Exposures — analyze client’s exposure to loss • Annual insurance expense — identify current and estimate • Internal risk management structure — review people and
• Claims/losses — review pending and closed claims/ post-closing costs, including ixed costs for premiums and resources dedicated to manage total cost of risk
variable costs for retained liabilities
litigation • Policies and procedures — review and comment on risk
• Current insurance — summarize current terms, premiums, • Incremental costs — estimate premiums for additional management policies and procedures
limits, and deductibles lines of coverage and/or increased limits • Management of service providers — review outside vendor
• Go-forward insurance — identify uninsured risks and related • One-time transaction-related costs — estimate run-off contracts and expenses, including brokers and third-party
administrators
premiums for policies with change in control provisions (e.g.,
risk transfer alternatives Directors and Oficers Liability) and transaction risk policies
• Purchase and sale agreement — review the insurance- (e.g., rep and warranty) • Loss prevention and claim management — review pre- and
post-loss policies and procedures
related sections of proposed transaction document
• Balance sheet accruals — compare client’s current accrual
to actuarially based estimate for historic retained losses
• Collateral — identify and comment on current, historic, and
estimated post-close collateral/letter of credit requirements
• Cash low — if applicable, provide cash analysis for retained
losses
Employee Beneits analysis
OVERVIEW OF EMPLOYEE BENEFIT PLANS FINANCIAL CONSIDERATIONS TRANSACTION RELATED AND POST-CLOSING
ASSESSMENT
• Current employee beneits — review plan documents, • Beneit plan expense — identify current and estimate • Purchase and sale agreement — review the employee
funding mechanisms, and governmental ilings for health, post-closing costs, including ixed costs for premiums/ beneits and employee-related sections of proposed
welfare, and retirement plans to summarize plan provisions, administration and variable costs for self-funded claims transaction document and comment accordingly
premiums, claims, and potential compliance concerns liabilities and pension and post-retirement, and post • Coordination of internal and external resources — work
employment obligations
• Evaluate portability — identify potential portability issues closely with actuarial services, executive beneits, and
of plans and comment on potential impact to successor • Balance sheet accruals — evaluation of accounting international beneits to provide comprehensive results
employer and the employees accruals compared to IBNR calculations, pension, post- • Transition to service teams — provide information and
• Severance and employment agreements — review of retirement, and post-employment obligations guidance to service teams, speciically with regard to post-
agreements to evaluate future liabilities of any employee • Allocations — identify and comment on accuracy of closing requirements to satisfy terms of the purchase and
beneits continuation beyond COBRA actual expenses as a stand-alone entity when compared to sale agreement
allocations from parent company
• Documents of inluence — review of documents such • Program cost eficiencies — review and evaluate the
as collective bargaining agreements, multi-employer • Cash at closing — identify any required cash outlow current program and outline options which can be leveraged
agreements, and other potential inluences on employee resulting from the transaction or new plan set up beyond to reduce expense
beneit plans ordinary expense (e.g., seed money)
Lockton Private Equity/Healthcare pitchbook 12 Lockton Companies
