case studies | Buy-side regulatory political due diligence
Regulatory and political due diligence for the purchase of an insurance intermediary in the EU by a global PE major
Overview
There has been intense interest from private equity in EU insurance intermediaries. Our client’s Target, like many other intermediaries, generates revenue from inducements and commissions on sales of insurance products. The client was therefore concerned about the impact of the EU’s Retail Investment Strategy (2023), which threatened changes to the rules on inducements. Our client wanted to understand the likely landing zone for these proposals given that there was a gap between the EU Commission and member states.
Work
Our insurance and financial services team, who have worked for regulators and governments on relevant policy, worked in tandem with our Global Investor Services practice, who have completed several advisory mandates on insurance policy. We consulted regulators and industry bodies in Brussels and relevant EU capitals to assess the likelihood of pushback from stakeholders (e.g. member states and industry) and determine the likely landing zone. We were able to explain how the proposals would apply to the Target’s precise business activities.
Impact
The client used our report to assess the risk to the Target’s business in advance of putting the deal to its Investment Committee. It used our report to inform questions for the Target’s management team to understand its mitigations. This enabled it to make an appropriate bid for the Target.
Advising on the acquisition of a service provider to the US home healthcare sector
Overview
Global Counsel’s US team advised a Philadelphia-based private equity firm on an October 2023 investment in an administrative services provider to the US home healthcare sector. This investment opportunity came amidst a federal regulatory backdrop in which President Biden’s FTC was placing increasing scrutiny upon private equity consolidation in the healthcare sector, as well as a funding imbalance for Medicare which may put further pressure on reimbursement rates, affecting revenues for the industry as a whole. Our client required us to forecast the probabilities of these policy outcomes and quantify the impact to the target’s business.
Work
Our team analyzed the shifting policy landscape in the durable medical equipment (DME) industry, and the impact of a federal competitive bidding program on the target’s primary client base. We concluded that federal competitive bidding for CME equipment would not end despite criticism from industry, but would lead to substantial further erosion in pricing of key products. GC also conducted analysis of US healthcare policy issues including Medicare reimbursement rates, covid-19 legislation, competition and 2024 election scenarios.
Impact
Our analysis helped prepare the client for a post-acquisition strategy, identifying political headwinds related to future rounds of Medicare competitive bidding. We advised the investors to plan for the target’s clients to face lower reimbursement rates, enabling them to more accurately forecast the value of acquiring the Target and establish a business plan to mitigate policy downsides.
Buy-side due diligence on the acquisition of a Local Government Investment Pool (LGIP) asset
Overview
Global Counsel advised a private equity firm based in Chicago and New York on its January 2024 acquisition of an investment service, which manages cash on behalf of municipalities and other local government entities. One of the chief concerns of our research included how previous high-profile LGIP failures to retain liquidity by might trigger increased regulations, as well as the impacts of an extraordinary inflow of post-covid federal stimulus funds to local governments on the industry that manages this cash.
Work
Our team evaluated the regulatory regime that governs these entities, including the programs across all 14 states in which the target operates. GC conducted interviews with state and local finance experts as well as federal advocates on how the company would be impacted by liquidity requirement reforms.
Impact
GC analyzed municipal finance policy across the 14 states that the target company operates in, allowing the investor's deal team to focus on the business case and other aspects of the acquisition. We also conducted 40 interviews with state and local finance and policy experts and attended a two-day conference on behalf of our client, providing the deal team first-hand testimony on the stability of said policies, distilled into an easy-to-read report.