Mergers, Acquisitions and Risk: Four Insurance Considerations for Growing BusinessesMergers and acquisitions represent opportunity, momentum and transformation. They are also milestones involving accelerated risk and increased scrutiny. By understanding and insuring against the risks, you can protect your company, its leadership and your deal value.
M&A Trends
Merger and acquisition activity is increasing. According to Reuters, research from the Boston Consulting Group shows that deal volume hit $1.938 trillion between January and September 2025, a 10% year-over-year increase. This shows that despite some uncertainty regarding U.S. tariff policies and geopolitical conflicts, deal activity is strong.
Much of the activity occurred in the third quarter of 2025, when Deloitte says the U.S. M&A market experienced a dramatic turn. The value of deals rose by 56%. Heading in 2026, Deloitte calls for deal making optimism in light of these figures.
For the individual businesses navigating deals, mergers and acquisitions represent an exciting opportunity to supercharge growth. However, a deal can also be a perilous time, with a heightened risk for litigation from investors, employees, competitors and other parties.
D&O Risks
Merger and acquisition activity is often associated with D&O risks, and for good reason. Statements and disclosures are subject to close scrutiny, and allegations of misrepresentation or breach of fiduciary duty are common. Although the risks are fairly well known for public companies, private companies can also face D&O exposures during dealmaking.
Insurance Considerations: Prior to a merger or acquisition, talk to your broker to discuss your D&O insurance needs. It’s important to secure coverage that protects activity leading up to the deal as well as actions that take place after the deal. Consider how the common change in control provision affects your coverage and whether you have adequate tail coverage.
Employee Risks
Joining two companies is a little like joining two families – although the union is exciting, conflict is common, and people don’t always get along. The two workplace cultures may clash, and this may lead to allegations of a hostile work environment, resulting in lawsuits. When employees are made redundant, wrongful termination lawsuits are also possible.
Insurance Considerations: Employee practices liability insurance provides important coverage for lawsuits alleging discrimination, harassment, wrongful termination and other similar employment-related claims. Prior to a merger or acquisition, review your coverage. Also consider whether you need to increase your limits. A larger company has more employees and a greater risk of litigation as a result.
Compliance and Regulatory Risks
Prior to a merger or acquisition, companies may face antitrust challenges. However, the regulatory scrutiny does not end there.
After a merger or acquisition, a myriad of compliance-related issues may emerge. You may have locations and employees in new states, resulting in new state laws that your company needs to navigate. You may uncover regulatory issues with the company you’ve joined, for example, with regard to employee benefits administration. The bigger a company is, the more complex regulatory compliance can become.
Insurance Considerations: Prior to a merger or acquisition, discuss your risks with your broker and determine whether your coverage is sufficient. In addition to D&O insurance, you may need employment practices liability insurance and fiduciary liability insurance, as well as coverage for exposures such as intellectual property claims.
Cyber Risks
There are two key issues to consider when looking at cyber risks after a merger or acquisition: the technology platform and the culture. To minimize cyber risks, you need both a secure technology platform and a culture that prioritizes cybersecurity. Otherwise, data breaches, successful phishing attempts, ransomware, and wire fraud are all very real threats. If the company you’ve joined doesn’t follow best practices, your data – and your reputation – could be in jeopardy.
Insurance Considerations: Cyber insurance has become more and more important as the line between technology and essential operations blurs. A merger or acquisition is a good time to review your cyber policy. Coverage terms vary, so pay attention to any limits, exclusions or restrictions in your coverage. Also consider how the merger process will impact your coverage and whether you’ll have sufficient protection throughout.
Merger and Acquisition Insurance Needs
While there could be countless other insurance implications depending on the details of your deal, these four implications are common to most deals. Regular insurance reviews can help your coverage keep up with your exposures. If your company is growing, and especially if you’re headed toward a merger or acquisition, it’s a good time to check your coverage. Heffernan Insurance Brokers can help you review your coverage and create an insurance program customized to your needs. Learn more.
