PitchBook recently released its 1H 2014 PE Exits & Company Inventory Report, which investigates recent trends in private equity exit activity. Among them was the banner year IPOs experienced in 2013. There were 58 PE-backed IPOs last year, the most since 2006, while on the VC side there were 84, which is more than any year since the dot-com bubble. But with all the upside to initial public offerings of previously private companies comes some risk.
Crystal & Company, an insurance and risk management firm, expanded on this topic in a guest article on the PitchBook Blog. Below is an excerpt.
“Once a company elects to undergo the IPO process, new and material risk exposures arise. The chance of being named as a defendant in a securities class action claim is more common within three years of the initial offering date. Class actions typically settle in the eight-figure range exclusive of costly legal fees. Directors and officers liability (D&O) insurance policies are the most common vehicle to transfer executive liability risk. The proper engagement of a specialized management liability insurance broker is critical to ensure that a comprehensive risk transfer product is in place to respond to the additional exposures associated with an IPO.”