Private Equity Solutions Working together to optimise results

Aon Strategic Advisors & Transaction SolutionsM&A Solutions

Risk. Reinsurance. Human Resources.

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We help you manage risks to optimise results

Invest01 Raise 02Invest

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Working with you, every step of the way

01We understand the complexity of private equity and the importance of protecting fund

professionals in their multitude of roles – be it in the role of fundraiser, investor, manager or seller.

02We have a fully integrated offering supporting our private equity partners in all of their risk needs on both a local and global scale. We are experts in arranging comprehensive private equity fund liability insurance, performing insight-driven due diligence, developing tools to retain the best teams, structure transactional and prospectus liability insurance programs to facilitate your exits.

03We provide direct value

for private equity firms through insights derived from our (i) industry and product specialisation

(ii) data and analytics (iii) global experience, and

(iv) innovative risk solutions

04 We are committedto ensuring an optimal client experience and results. Our global market leverage gives you access to the best solutions and insurers.

Exit

Hold

Invest

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Working with Aon

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Our credentials

Global LeverageWe secure best price and cover as:

• #1 or #2 trading partner with every insurer globally

• Aon globally transacts more than $41 billion insurance and reinsurance premiums per annum

Bench StrengthOur dedicated European PE team comprises of:

• Dedicated transaction liability experts, dedicated due diligence experts across offices in Europe

• 23 global offices to provide local expertise

• 350+ dedicated M&A professionals globally

Experienced ProfessionalsOur M&A Solutions team are experienced and provide tailored advice:

• having delivered over 5,000 projects globally in the past 5 years

• as legally qualified transaction liability specialists

• 25+ years of service to corporate and private equity clients

• direct access to global industry specialists

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Raise

Protecting the Funds and Fund ProfessionalsIt is vital that your funds and the personal liability of your key officers are protected. It is equally important that investors in your funds remain committed and have confidence that their investments will yield a healthy return.

Insurance needs to be treated as a core asset of the fund—structuring adequate and tailored fund liability insurance is a key component of any fund’s risk management strategy, and a source of distinction from your peers in attracting investment. It is also critical that should a particular asset or transaction not deliver the expected outcome and disputes arise, the effect of this will be mitigated through your fund liability insurance which protects both your fund professional and your funds.

Key features of Aon’s Proprietary Fund Insurance Solution

Investigation costs coverage extends to any Insured Organisation

Broadest possible definition of Investment Advisory Services to accommodate all activities undertaken by the firm

Broad Insured and Insured Person definitions accommodate all group entities

Breadth

Flexibility The firm may utilise any law firm it wishes to defend an action

Recognition that if the firm chooses to move to new insurers, there is no dilution of policy coverage from a previous policy

Automatic new fund cover

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1 Insurance Due Diligence - Understanding the Risks We help our clients understand the risks associated with a transaction and develop solutions to protect the assets

and future earnings. We ensure that your acquisition is protected comparative to best practice and highlight areas where potential cost savings or coverage improvements may be realised to unlock value going forward.

Why carry out Due Diligence?

identification of target specific risks that could stall or terminate the deal and develop solutions to mitigate

assessment of claims experience and exposure to past liabilities

assess current insurance program’s suitability, coverage and cost

design & cost a fit for purpose go forward insurance program aligned to investment mandate

bankable report to get approval from banks and debt providers

design and implement 100 day action plan post signing

balance sheet protection

Preparation for sale:

filter insurance information, field questions and provide report to prospective bidders to expedite Q&A and bid process

design and cost stand-alone program for cost certainty in advance of carve out

arrange insurance run-off to protect fund and directors & officers from future liabilities and exposure

vendor insurance due diligence report that can be relied upon

speed up the sales process and timing

Buyer

Seller

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Valuable insights through industry and product specialists

We have dedicated insurance due diligence resources that understand the M&A process, and have deep expertise across general insurance, workers compensation, superannuation, life insurance and other employee benefits.

Few insurance advisers possess the level of expertise across as many different industries. Niche advisers are certainly at a disadvantage given the global scale and sheer resources required to field the expertise in so many different industry sectors. The following illustration highlights the number of global deals by industry sector we have supported between 2010 - 2014.

Manufacturing852

Personal & Professional Services368

Oil, Gas & Mining236

Wholesale53

Agriculture51

Automotive133

Aviation117

Investment, Insurance, Finance & Banks360

Food & Beverage195

Transportation Services & Shipbuilding161

Paper & Packaging90

Power, Utilities & Renewables79

Printing & Publishing52

Real Estate118

Restaurants50

Retail157

Software & Technology222

Health Care280

Infrastructure128 Life Sciences/Biotech

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Chemicals129

Communications105

Construction189

Defense Contracting26

Educational, Nonprofit & Government69

Electronic & Electrical Equipment125

Entertainment & Hospitality147

Energy353

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Insurance Solutions

Buy-side Improvements Sell-side Improvements

Warranties & Indemnities

• W&I Insurance • Achieve lower purchase price (eg. trade lower purchase price for elimination of an escrow)

• Achieve more certain deal protection than standard escrow/indemnity cap through insurance equivalency

• Shut down auction process in favour of buyer by accepting seller reps “as is”

• Provide W&I insurance for “public style” deals through insurance equivalency

• Eliminate or sharply reduce escrows

• Increase speed of deal execution

• Close out end-of-life-fund

Transaction Specific Issues

• Tax Insurance

• Litigation Insurance

• Environmental Insurance

• Contingent Risk

• For “deal-breaker” issues ring-fence existing issue with insurance to achieve an acceptable level of exposure

• For major issues having a material effect on value:

– Ring-fence with insurance to determine a known worst-case scenario

– Determine if a pricing arbitage exists between insuring the outcome and the purchase price reduction imputed by valuing the risk

• Reducing perceived risk by buyer to incentivise more participants into the auction

• Quantify the worst-case economic exposure of a known issue with an uncertain outcome to reduce leverage of buyer side to seek discount against specifically identified risks

How deals are facilitated through insurance

2 Transaction Liability Solutions - Eliminating Deal Obstacles Aon’s M&A products and services enable our private equity clients to do deals confidently and with enhanced

economic terms. We help our private equity clients invest and exit investments by transferring M&A risks to the insurance market through a number of different solutions. These solutions are:

A tool for sellers – enables a clean exit for sellers with no trailing liabilities, expediting the distribution of proceeds to investors. We have seen the increasing pro-active use of TL insurance by sellers in exit situations, with W&I or Tax policies being offerded as the “stapled” solution to deal issues in the sale process.

A tool for buyers – less common now, but TL insurance can allow buyers to enhance their bids in an auction scenario or to obtain warranty protection where sellers are unwilling or unable to provide the post-closing recourse required or if they are financially distressed or are a group of individuals.

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Cost of Risk vs Return on InvestmentOur aim is to help private equity firms to identify, understand and manage the cost of risk within portfolio companies, so as to maximise the return on

investment upon exit

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1. Understanding your costsThe key to effective risk management is understanding an organisation’s risk profile and consequent needs and then using insurance as a financial tool. Aon uses a formula to measure Total Cost of Insurable Risk (TCOIR). This is the full cost incurred by a business (in addition to the obvious premium costs) to deliver a risk management strategy. It provides a sound basis on which to then manage, control, measure and compare insurable risk costs and performance.

2. Understanding your risks As you invest in portfolio companies with different risk profiles and sector exposures, you may become exposed to a myriad of risks which, if realised, could cause a catastrophic loss to the portfolio company’s balance sheet and potentially expose fund professionals to claims of mismanagement. Assessing risk exposures ahead of an acquisition as part of a due diligence process will better equip and position the business to proactively plan for the management and/or transfer of such risks.

We specialise in assisting businesses establish mature risk management programs to protect their balance sheet and ensure that the board and management has discharged its responsibilities in managing risk.

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3. Managing the portfolioThere are a number of ways we can support our private equity clients manage their portfolio companies. We provide below three distinct examples being:

Risk identification / mitigation;

Risk transfer efficiency; and

Emerging risk

Optimising human capital management

Emerging Risk – Network Security & Privacy (Cyber)

Cyber risk is the single most significant emerging risk facing organisations. Quite apart from the cost of dealing with the financial consequences of a serious cyber incident or data breach, the damage to an organisation’s brand and reputation can be crippling.

Almost every week another business is in the headlines for the latest data breach or cyber security attack. A cyber-attack or data breach can take many forms; from deliberate attacks to technological negligence. The perpetrators range from organised crime groups to competitors, and even disgruntled employees.

Private equity firms – unique exposures

Inherent privacy and security issues in M&A transactions, both at the due diligence stage and consideration around specific representation and warranties set out in the SPA

Country specific privacy and data protection laws for transactions involving business operations or related entities other jurisdictions

A significant amount of confidential data on target entities and their portfolio companies

Significant risk of brand and reputation damage

Common misconception that cyber risks are already covered by existing insurances

Increased vulnerability to breaches caused by former employees, including departing senior management eager to retain access to client files/data

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Make moneyRealise untapped potential of your peopleWe enhance the value of a portfolio company by:

delivering a harmonised organisational structure with market aligned compensation and benefits programs

attracting and retaining key talent

driving engagement and productivity

Save moneyMitigate risk in your workforceWe mitigate people risks by:

identifying and quantifying liabilities and people risks

• removing replication and identifying cost saving opportunities

to ensure the deal price and warranties are adjusted appropriately

to facilitate swift deal completion

Optimising Human Capital Management

Attract and retain talent & incentivise business performance

Leadership

assess and develop leadership capability to successfully deliver change

due diligence of leadership team effectiveness and assessments of succession risks

Culture

assessment, organisational alignment and cultural change strategies

Productivity and Reward

attract, retain and positively drive employee engagement during change

identification of performance and retention risks for consideration in the transaction value

optimised and market aligned pay and incentive structures to achieve retention and productivity growth

Guidance and Support

project management and transition governance oversight

effective communication to promote impacted employee financial wellness

access to independent financial advice

Mitigate People Risks & costs

Employee Benefit Plans and Superannuation

identification of potential trailing litigation and regulatory issues

actuarial advice to quantify and mitigate defined benefit and leave liability risks

benchmarking review of vendors

Workers’ Compensation & Safety

compliance review

optimise insurance spend

Risk Culture

assessment and development strategies to drive effective business decision making and mitigate compliance and reputational risks

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Exit

When it comes time to diverse portfolio companies and realise returns, we work side by side with our private equity clients to facilitate efficient and clean exits through insurances that support both private and public sales.

Private equity firms choose to partner with Aon when planning for an exit given our ability to work in ‘deal time’ with a team of former M&A lawyers who understand the dynamics of a transaction. Given the breadth of offering and expertise and the size of our teams, Aon also has the ability to support dual track processes and large, competitive auctions requiring multiple transaction trees.

Exit Risk Solutions

• Insurance coverage and cost certainty

• Ring fences past liabilities

• Expedites the Q&A process

Vendor Due Diligence

• Ensures competitive auction

• Expedite the sale process

• Clean exit for seller

Transaction Liability

• Protects fund’s return on investment

• Protects personal assets of fund professionals

• Access to law firm of choice to protect your reputation

Protecting Fund & Fund Professionals

• Protects all deal participants

• Dedicated limit for IPO representations

• Upfront coverage and cost certainty

IPOs

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Risk. Reinsurance. Human Resources.

About Aon Aon plc (NYSE:AON) is a leading global provider of risk management, insurance brokerage and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 72,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative risk and people solutions. For further information on our capabilities and to learn how we empower results for clients, please visit: http://aon.mediaroom.com/

© Aon plc 2016. All rights reserved.The information contained herein and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information and use sources we consider reliable, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate profes-sional advice after a thorough examination of the particular situation.

aon.com

FP ASATS/Oct2016/028

FSG0004A 1115

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