How do you structure insurance for a multi-site CDMO acquisition?

CDMO acquisitions — whether of single-facility specialty operators or multi-site platforms — generate three concurrent insurance work streams: (1) deal-related insurance products like R&W, tax, and contingent-liability policies, (2) coverage transfer planning for the target's in-force policies, and (3) integration of the target facilities into the acquirer's existing program. The work stream typically begins at LOI and continues through close and 30-60 days post-close.

R&W policies cover defined breaches of seller representations discovered post-close. For CDMO targets, the meaningful representation categories are: financial statements (revenue recognition, inventory, sponsor-receivable adequacy), material contracts (sponsor MSA compliance, GPO supplier agreements, hospital purchase contracts), regulatory (FDA registration, cGMP compliance, state board status), IP (license-back obligations, IP indemnity), and environmental (site contamination history).

R&W limits typically run 10-20% of enterprise value at the upper bound, retentions of 1% of EV common, premium 3-5% of policy limit. Underwriting period 4-6 weeks from data room access; underwriting requires deep diligence by underwriter counsel into financial and material-contract representations.

The target's D&O, professional liability, EPLI, fiduciary, and cyber policies are claims-made. Without tail coverage, claims arising from pre-close acts but reported post-close are uncovered. Standard transaction practice: buy tail (Extended Reporting Period, typically 6 years) on each claims-made line as a condition of close.

Tail premium typically runs 100-300% of expiring annual premium for the affected line. For a target with $50,000 annual D&O premium, a 6-year tail runs $50,000-$150,000. Premium is paid at close from deal proceeds, treated as a transaction expense.

New facilities entering the acquirer's portfolio need property values, business interruption, and equipment lists updated on the in-force property program. cGMP property forms have specific rebuild and validation-cost provisions that need to be sized to the new facility profile. Products and completed operations limits may need to scale if the acquisition increases revenue meaningfully.

For acquirers integrating multiple targets in succession, the renewal cycle becomes the natural integration point; some operators stagger close dates to align with carrier renewal and avoid mid-term endorsement complexity.

Sponsor MSAs typically require sponsor consent on change of control. Insurance obligations under those MSAs may shift in scope as the sponsor reviews the post-close program; some sponsors use the change of control as an opportunity to renegotiate insurance terms. Hospital purchase contracts and GPO supplier agreements similarly require change-of-control notice and sometimes re-credentialing.

The insurance program documentation produced at close should be sufficient to demonstrate post-close compliance with every sponsor MSA insurance schedule — typically requires updated certificates of insurance issued in the acquirer's name within 5-10 business days of close.

For a $100M EV CDMO acquisition, deal-related insurance premium typically runs $250,000-$600,000: R&W premium $200,000-$450,000, tail premium on claims-made lines $50,000-$150,000. The figure varies widely with deal structure, diligence findings, and the in-force program at the target.