Insurance Solution for Overseas and Domestic M&A 曾万里 Zurich Financial Service Group July 27 2011 at Tsinghua University

Zurich Financial Service Group Zurich Financial Service Group （Zurich）was found in 1872 with headquarter in Zurich city. Global employee 60,000，covering more than 170 countries and regions。 In 2010，Zurich was ranked No. 85 among Fortune 500 with USD 4.9 billion Net Income。 With very strong financial strength, Zurich is being rated AA- by Standard & Poor’s. 1/18/2019

Buying Overseas In 2010, China’s overseas M&A transaction volume was close to USD 50 billion …. Source: Deloitte China Overseas M&A Report Over 50% of overseas M&A transactions failed .. 1/18/2019

Potential Risks in Overseas M&A Political Risk Operational Risk Buyer Seller Legal Risk Financial Risk Risk Assessment Due Diligence Sale and Purchase Agreement (SPA) Warranty & Indemnity Clause for uncertainties and contingency of Seller Breach of Warranty by Seller Insurance Company M&A Insurance providing coverage for the loss resulting from the breach of Warranty by the Seller. 1/18/2019

M&A Policy （Buyer Policy） Covering the buyer’s loss. Major Coverage： Loss resulting from Seller’s breach of Warranty Clause in the SPA; Providing the same or longer warranty period than the period provided in the SPA; Legal costs resulting from the breach of warranty; Loss resulting from the fraud and dishonesty committed by the seller. 1/18/2019

M&A Policy （Seller Policy） Covering the Seller’s loss. Major Coverage： Loss resulting from Seller’s breach of Warranty Clause in the SPA; Providing the same or longer warranty period than the period provided in the SPA; Legal costs resulting from the breach of warranty. 1/18/2019

Why M&A Insurance Seller’s financial capability of indemnifying the Buyer during the long warranty period; Insurance company’s financial strength to back up the warranty with long warranty period. For buyer and seller to avoid contingent liabilities / escrow. Provide more flexibilities in negotiating the SPA as a deal facilitator. 1/18/2019

Case Study 1 One PE firm invested USD 10m into a small Energy company. After years, the PE firm intended to sell its shares in this energy company, however the potential buyer had big concerns on the potential contingent liabilities related to environmental issue and refused to take it over. Finally, the PE Firm purchased the M&A insurance for this particular warranty item and sold its share with a clean exit. 1/18/2019

Case Study 2 When one international software company conducted a overseas acquisition, it was not fully convinced with the target company’s ownership on some intellectual property. They put this matter into the Warranty section of SPA, which stated that in case of the breach warranty, the seller would pay up to USD 20m penalty to the buyer. However, since the buyer still worried about the overseas enforcement of the contract and the financial strength of the seller, the buyer finally purchased the M&A insurance for this warranty item to close the deal. 1/18/2019

Zurich’s M&A Strength Over 30 years of experiences in M&A Insurance Tailor-made policy for the M&A deal. Big capacity supported by excellent financial strength. Global network for underwriting and claim handling. Dedicated M&A underwriting team with partnership with M&A law firm. 1/18/2019

谢谢 Disclaimer Notice: “The information on products in this presentation is for general information purposes only and does not constitute advice.  All data has been compiled from sources believed to be reliable.  No warranty, guarantee or representation is made about the accuracy or sufficiency of any statement it contains.   1/18/2019