Transaction Liability Insurance: A Strategic Approach to Deal Risk Management I’ll work with design to create a TL graphic

The Challenge of Deal Risk… Unknown risks can prevent a deal from closing quickly and leave buyers without certainty. Post-closing liabilities and holdbacks Changing tax and environmental regulations Adequate deal protection Seller Concerns Buyer Concerns Ability to attract buyers Competing bidders’ terms What are the challenges our clients are facing Depending on the audience level, you can use this to educate less versed audiences on market challenges or discuss the current landscape with those more familiar. Gets the audience on the same page as you Opportunity to frame the conversation and remind the problems/challenges that you are solving. I can also create alternative slides to allow you to use this with client hot buttons for specific deals. Claw-back exposure Extended time to closing Deal-breaker issues

Deal Risk Challenges…Meet Transaction Liability Insurance Solutions The strategic use of Transaction Liability Insurance can help buyers and sellers reach their goals. Representations & Warranties Insurance Post-closing liabilities and holdbacks Changing tax and environmental regulations Adequate deal protection Seller Concerns Buyer Concerns Tax Insurance Ability to attract buyers Competing bidders’ terms What are the challenges our clients are facing Depending on the audience level, you can use this to educate less versed audiences on market challenges or discuss the current landscape with those more familiar. Gets the audience on the same page as you Opportunity to frame the conversation and remind the problems/challenges that you are solving. I can also create alternative slides to allow you to use this with client hot buttons for specific deals. Litigation & Specialty Insurance Claw-back exposure Extended time to closing Deal-breaker issues

Advantages to Sellers Seller Concerns Transaction Liability Insurance helps sellers Expedite the sale process Exit deal with increased funds Attract best offers Reduce or eliminate post-closing indemnity obligations Reduce contingent liabilities Protect passive sellers Post-closing liabilities and holdbacks Seller Concerns Ability to attract buyers 3. Transition to benefits to sellers Provide examples Ask audience about usage? Claw-back exposure Extended time to closing

Advantages to Buyers Buyer Concerns Transaction Liability Insurance helps buyers Increase maximum indemnity and extend survival period Be viewed as a more attractive bidder Protect key relationships Ease collection concerns from distressed or un-creditworthy seller Provide recourse for unidentified issues Changing tax and environmental regulations Adequate deal protection Buyer Concerns Competing bidders’ terms What are the challenges our clients are facing Depending on the audience level, you can use this to educate less versed audiences on market challenges or discuss the current landscape with those more familiar. Gets the audience on the same page as you Opportunity to frame the conversation and remind the problems/challenges that you are solving. I can also create alternative slides to allow you to use this with client hot buttons for specific deals. Deal-breaker issues

A Mainstay of the M&A Industry Increased use and policy limits by Aon clients What this means for your deals Insurance is a strategic part of the bid process for both buyers and sellers Buyers without insurance are at a disadvantage Not all deals are created equal A sophisticated approach to insurance is now a requirement Policy Limits Placed Number of Policy 5. The use of TL insurance has grown. Those not using it are at a strategic disadvantage. Deals are complex and unique- important to partner with someone who can provide tools, along with strategic advice and deep understanding of the insurance market. Expertise of Aon TL team, supported by the strength and breadth of Aon. The best of both worlds. “Benefits and resources of a large company, with the individualized attention of a boutique firm.” *Data based on Aon's placement of R&W policies. **Data based on Aon's placement of all policies (i.e., R&W, tax, litigation buyout, CFIUS)

Transaction Liability Insurance Carriers in 2014…. 6. Let’s look at the market just a few years ago. Only a handful of players in the space

….Fast Forward to 2017 7. Fast forward to today. Increased demand led to increased providers. What does this mean to you? Flexible solutions, price compression Even more important to work with someone that can leverage buying power and help negotiate the best option for your deal

Representations & Warranties Insurance 8. Let’s take a closer look at R&W insurance

Representations and Warranties Insurance Representations and Warranties insurance allows sellers to close a deal with limited or no indemnity while providing buyer protection for unknown breaches. Traditional Deal Structure Representations & Warranties Policy $10MM Proceeds at Risk $0.5MM Proceeds at Risk 9. Demonstrate how our reps & warranties compares to the status quo. $99.5MM Net Proceeds at Closing $90MM Net Proceeds at Closing *Seller may cover a share of policy premium

Representations and Warranties Insurance: Enhanced Indemnity A buyer-side representation & warranties insurance policy may enhance a buyer’s potential for recovery rather than simply replace the typical seller’s indemnity. Survival Period Materiality Scrape Definition of Loss Limits 10. Review important TL insurance factors. Please note that I can animate to allow you to tell one part at a time.

Representations and Warranties Insurance: Process and Timing Partnering with a team that deeply understands the sensitivity and timing of a deal is paramount to your success. Engage Broker 1 Day Select Insurer Day 4 Bind Coverage Day 1 1 2 3 4 5 6 7 8 9 10 Day 2 - 4 Obtain insurance quotes 2 - 4 Insurer Underwriting and Policy Negotiation Day 2 - 4 5 - 1 11. Explain the process.

Representations and Warranties Insurance: Important Considerations Required Information Breadth of Coverage Cost & Policy Retention Deal Confidentiality Deal Team and Service 12. Close section with important takeaways Please note that I can animate to allow you to tell one part at a time.

Tax Insurance 13. Transition to tax insurance

Advantages of Tax Insurance Tax Liability or Tax Opinion Insurance protects buyers against a successful challenge by the IRS or other foreign, state or local tax authority and can help sellers close their deal more quickly. Key Benefits What is Covered Achieves economic certainty Eliminates the need for escrow Streamlines negotiations by eliminating deal-breaking issues Failure to achieve expected tax treatment Retroactive change in tax law Manages counterparty exposure Protect tax positions from challenges Reduces uncertainty in cross-border deals Challenges from U.S., state, local or foreign tax authorities Recovery for tax, contest costs, interest, penalties and gross-up 14. Frame how tax insurance can meet their goals and what is covered Gary – I had an incomplete note on this slide. Please let me know what you would like updated.

When to Consider Tax Insurance USA UK/Europe S corporations Tax-free reorganizations/mergers Section 355 spin-offs REITs/real estate acquisition/sales Partnership issues Employee benefits issues NOLs Federal and State Tax credits (e.g., solar ITC, low income housing) Tax neutral reorganizations Availability of degrouping relief Debt for equity tax relief Substantial shareholdings exemption (SSE) Offshore and residency issues REITs 15. Where tax insurance can be used Should we have a slide on litigation/CFIUS/Bespoke? *Tax Shelters (listed transactions) are not insurable

Litigation and Specialty Insurances

When to consider Litigation Insurance Pending or potential litigation can expose buyers to significant risks and financial liability. Litigation insurance can offset that risk or limit the liability buyers will be responsible for once the deal is complete. When to consider Litigation Insurance M&A Deals Helps sellers avoid substantial escrow requirements Allows buyers to ring fence the cost of damages from an adverse judgement Ongoing Business Risk Management Protects companies from catastrophic loss from an adverse judgement Possibility of a catastrophic outcome Pending litigation is preventing a deal from closing Likely attachment point or retention due to potentially large range of damages Litigation arguments are well developed

Transaction Liability: Claims 16. Transition to claims stats

Representations & Warranties Insurance: Global Claims 17. Frame industry stats Source: AIG Global M&A Claims Study 2017

Transaction Liability Insurance & Claims: Aon Policies Percent of Aon policies that resulted in claims When to consider Litigation Insurance 2016* 14 3.9 % 11 9 8 2015* 2014 7 12.6 6 6 % 17.6 % 5 18. Comfirm what Aon has been experiencing. Tax Employee All others Litigation Financial Statements Contracts *More claims for policies that incepted in 2015 and 2016 are likely forthcoming Compliance Intellectual Property

Transaction Liability Insurance Questions?