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Mergers, acquisitions and uninsured liabilities

Before signing a deal for a merger or acquisition, a Colorado business owner should make sure to address any insurance-related issues with the target company. Unknowingly acquiring liabilities can negatively impact a company in many ways. It is important that a business owner consults with a transactional attorney about insurance issues that could arise.

An owner who is aiming to merge with or acquire a business should carefully review the insurance policies of the target company as well as all other contracts that may provide indemnification. This is a very important step before signing any merger and acquisition contracts. That's because the actual cost or value of the transaction can change depending on whether there are insurance policies in place for the target company's identified and potential liabilities. If there have been uninsured liabilities that have been identified, the selling price can be modified or the buyer can request to be indemnified by the seller.

In order to identify uninsured liabilities, a buyer can examine the most significant liability exposures of the target company and determine if the liability exposures are properly covered by the necessary insurance policies. A buyer can also closely review the claims history of the seller to learn whether liabilities that have been settled can potentially occur again.

An attorney who practices commercial law may advise a client during certain business transactions. Legal counsel could work to protect the interests and rights of an entrepreneur engaged in merger and acquisition transactions. This might include advising that certain insurance policies be in place before the deal is completed. Assistance may also be provided for resolving contract disputes and addressing other legal concerns related to growing a business.

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