M&A activity, derailed for much of the recession,is back on track. In the first nine months of 2010, the aggregatedollar volume of global acquisitions increased 21%, to $1.75trillion, according to Thomson Reuters, with the third quarteralone seeing the most mergers and acquisitions in any three-monthperiod since the third quarter of 2008.

In the United States alone, 5,760 deals worth $595 billion wereannounced in the first nine months of last year, an increase of18.6 % from the same period the previous year. Both the volume anddollar values of deals are expected to hold up during the firstquarter of 2011. Last April 57% of executives polled by Ernst &Young said their businesses were “likely” or “highly likely” toacquire other companies in the next 12 months.

What does the uptick mean for acquirers' risks post-acquisition?We asked Jeff Burchill, senior vice president and CFO of FM Global,a large Providence, R.I.-based property insurer and provider ofloss prevention strategies, which had $3.6 billion in 2009revenues, for his thoughts on the subject.

T&R: Would you agree that M&A activityis on the rise?
Burchill: I certainly believe that the currentincreases in mergers and acquisitions will continue into 2011, ifnot increase. Companies have stockpiled cash and are looking todeploy it strategically into growth strategies. Typically, when abig deal happens in a particular industry segment, it invites othercompanies to start acquiring in that sector. Competition heats upand, in their haste to close deals, due-diligence times arecompressed.

T&R: As companies rush forward, what typesof risks does this create for them?
Burchill: Supply chain exposures first come tomind. For example, say both your company and the one you'reacquiring buy a key component from the same one supplier. Only thissupplier provides the component. Now if that supplier has financialdifficulties and cannot meet its order obligations or goes out ofbusiness, the impact is now doubled.

T&R: Any other risks come to mind?
Burchill: Sure, say a company is looking toacquire a multinational with multiple facilities overseas. Incertain regions, these properties may not be up to HPR [highlyprotected risk] standards. The standards are given to the highestquality properties, where both loss frequency and severity aremitigated by loss prevention measures like fire sprinklers, waterhydrants, smoke alarms–that sort of thing. The risk of loss istherefore higher. And if a loss does occur, it not only hits thefinancials, it can damage the acquirer's reputation.

T&R: How does FM Global assist in avoidingthese train wrecks?
Burchill: We have 1,500 loss prevention engineersglobally and can put someone at the site of a target acquisition'sfacility immediately to evaluate both property risks and supplychain exposures. They'll make recommendations on how to bring theproperties up to HPR standards, evaluate potential breakdowns insupply links, and suggest contingency plans.

To read Jeff Burchill's profile as one of T&R's2009 CFOs to Watch, see Steering Through Troubled Times.