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Mergers pressure risk managers from all sides

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NEW YORK — Merger and acquisition activity can pack a double whammy for risk managers.

M&A activity among insurers and brokers has risk managers concerned about market choice and responsiveness. Reduced competition can also put a damper on innovation.

Yet, as was made clear during panel discussions this week at Business Insurance's seventh annual Risk Management Summit in New York, risk managers themselves can face various stresses when their employers are involved in M&A.

“Each acquisition is very different,” said Kathy L. Schroeder, Boca Raton, Florida-based senior director-global risk management at Office Depot Inc., which does business as Office Depot OfficeMax.

Ms. Schroeder has been involved in mergers and acquisitions as a risk manager for both the acquiring and the acquired company.

Office Depot last year proposed merging with office supply competitor Staples Inc., which is being fought by the Federal Trade Commission. In January, Office Depot and Staples Inc. agreed to merge. The union has been delayed to allow resolution of the FTC litigation.

There are always surprises in an M&A situation, said Ms. Schroeder. For example, separate insurance programs may continue even after employees have begun crossing over to the new organization, she said.

In addition, M&A activity creates duplication, she said, and the acquiring company's risk manager is not necessarily a shoo-in for the top risk management job in the combined organization. There's also the question of how risk management departments are merged. “What happens to your team when you're going through this?” she said.

Insurance can play a role in the M&A process as well, said David S. De Berry, CEO of Concord Specialty Risk Inc., a New York-based unit of Ryan Specialty Group L.L.C. For example, presentations and warranties insurance can help protect the parties in a transaction from liabilities stemming from inaccuracies in information made in the merger and acquisition agreement. Contingent liability coverage can also play in role in situations such as patent disputes, he said.

Craig J. Nelson, managing partner of risk at Centennial, Colorado-based risk management consultant Prevail L.L.C., moderated the panel discussion.