Mergers and acquisitions have always been a focus for Navine Aggarwal; insurance, however, was a different story. “It wasn’t a field that appealed to me,” Aggarwal says. “But when the right company and the right product comes knocking, it can change your perception.” The right company was Allied World Assurance Company, and the right product was reps and warranties insurance, which helps protect the buyer from future losses during a merger or acquisition. Today Aggarwal is vice president of mergers and acquisitions, specifically managing the New York team in this specialty product. Aggarwal recently spoke to Advantage about the biggest challenges he encounters in his field and what makes reps and warranties insurance so interesting.
Advantage: How did you end up at Allied World?
Navine Aggarwal: I was an attorney doing M&A transactions and also had experience working in M&A on the investment banking side. At the time Allied World came on my radar, I was working in operations at a global media company. I got a call from a former colleague at my law firm and was told they were building a group in the US, and they wanted to know if I was interested in being interviewed. At the time, my attitude was, “Why would anyone want to work in insurance?” Insurance just seemed … sleepy. I had this idea it wasn’t as challenging or engaging a field. But I liked what I heard in the interview, and I liked the product. And the idea of being able to build something from the ground up was exciting to me.
Were you concerned about transitioning into an entirely different field?
Yes and no. Pretty quickly I discovered that a lot of my skills as an M&A attorney were transferable, and there were a lot of similarities despite the different fields. You’re constantly assessing risk when you’re working in a legal capacity, and this is identifying business risk in addition to legal risk. I’m looking at risk very differently now, but the skill set is similar.
Graduates from the Schulich School of Business at York University
Works as an investment banking analyst at Macquarie Bank
Graduates from the University of Toronto with JD and MBA degrees
Begins practicing corporate/M&A law at Ropes & Gray in New York
Becomes director, office of general counsel at Thomson Reuters
Becomes assistant VP of M&A at Allied World
Is promoted to VP of M&A at Allied World
Tell me a little about Allied World’s specialty product: reps and warranties insurance.
It’s a product to help facilitate M&A transactions. For example, say you’re selling a company to a buyer. There are 30 pages of representations, no outstanding taxes, the financials are accurate. It’s selling for $100 million—but only $90 million upfront and $10 million is held back, in case there are issues or losses that weren’t accounted for. Reps and warranties insurance covers the buyer or seller against losses for those unaccounted issues or losses.
What is the competition like? Are there a lot of companies offering reps and warranties insurance?
This is a specialty product; there are only about six insurers in the space in the North American market. You can’t really pull underwriters from other lines of insurance and ask them to work in M&A insurance. You need someone with very strong experience, or an M&A attorney, because this work requires a specific skill set.
It’s also a relatively young product. It’s been in the market for about 15 years, and it’s always changing. In the past year, we’ve seen more companies try to enter the market, but again, this requires a very special skill set—and growth requires having access to talent, and there is definitely a lack of talent in the industry.
What are the biggest issues you’re up against each day?
We’re a small but growing group, and that requires being involved in every aspect of running the business. Managing client and broker expectations is always a challenge, and as underwriters in the M&A space, we’re under a lot of pressure to be in line with transaction deadlines. On any given day, we’re looking at every aspect of risk on multiple deals. It’s a lot, but no two deals and no two days are alike, so it keeps things exciting. It’s exactly the kind of thing I didn’t anticipate before entering this industry or joining this company.
Another challenge—and it’s a good challenge to have—is how rapidly this product is taking off. The growth has been explosive. We’ve had over 100 percent growth in each of the last couple years. When I arrived, we were a team of two; now it’s six, and we’re in the process of hiring additional resources.
What is the biggest challenge that your team faces?
Because of this insurance product, companies are approaching deals differently, and by that I mean buyers are using it to get aggressive in competitive bidding situations, and sellers are walking away with little to no obligation after the deal is done. Sellers used to negotiate the agreement and disclose as many issues as they could against the reps and warranties. Now the incentive has shifted. We have to be careful of sellers agreeing to terms they otherwise wouldn’t agree to, and we have to carefully balance that risk.
What are you most proud of in your work with Allied World?
There’s a lot to be proud of. We’re the new kid on the block. This practice started in 2012, and already we’re competing with the top players in our field. We tripled our revenue in 2013 and more than doubled again in 2014, and our team is growing. Moving forward, I want to further expand awareness of the product. It’s known in legal M&A circles in major cities like Boston, New York, and Chicago, but I want to start seeking out opportunities elsewhere. I want to expand the network of where we see deals and move into new areas of the country. I’m confident in the value of our product, so I don’t see expanding into new markets being a problem.