Over the past couple of years, KCIC has been increasingly involved in Liability Divestiture Transactions by working with clients on both the sell-side and buy-side of these deals. With these engagements, we’ve been able to help companies value various liabilities into the future and calculate an expected cash flow (net of insurance) to determine a purchase price. Our involvement has spanned a wide range of liabilities, including asbestos, PFAS, and sexual abuse. As these liabilities continue to create financial uncertainty, liability divestiture transactions have grown in popularity as an alternative to bankruptcy; thus offering companies a way to achieve greater financial clarity while transferring ongoing claims management to specialized third parties.

I recently came across an article from Skadden that does an excellent job outlining how these transactions are structured and why they are gaining traction. Given our growing experience in this space, the Skadden piece reinforces what we are seeing in the market firsthand. For companies grappling with significant contingent liabilities, liability divestiture transactions are becoming an increasingly viable and sophisticated risk-management tool worth understanding.