Mergers and acquisitions are on the rise again in 2025. Dealmakers are eager to take advantage of steady interest rates, available capital, and new opportunities in various sectors. However, challenges remain, especially due to geopolitical tensions. Issues like trade policy uncertainty in the U.S., the ongoing conflict in Ukraine, and political shifts in countries such as Germany and France are making investors cautious.
Rowan Bamford, president of Liberty GTS, a prominent provider of M&A insurance, highlighted that cross-border transactions are riskier than domestic ones. This could lead to increased demand for warranty and indemnity (W&I) insurance, which helps protect buyers in these deals. Bamford noted that while M&A activity in the U.S. was slower than expected at the beginning of the year, he doesn’t see it as a long-term trend. He believes the market is simply adjusting to potential changes in policy.
In Europe, the situation is different. Cross-border deals are more common, but they come with their own set of challenges. Investors must consider the economic conditions in both the seller’s and buyer’s countries, making the process more complicated.
Investor sentiment is particularly cautious in North America due to rising political tensions. Many buyers are hesitant to engage in transactions amid discussions about tariffs and economic nationalism. This has led some American investors to reconsider European targets as the continent grapples with its own political issues.
Interestingly, the UK has emerged as an appealing market for investors. Compared to continental Europe, it offers more stability. With lower interest rates and a push to become a technological hub, the UK is seen as a safe place for investment. Bamford pointed out that language barriers are less of a concern when dealing in the UK, making transactions smoother.
Attention is also shifting toward Asia. Investors are looking at the region as a counterbalance to instability in the West. While Southeast Asia has traditionally attracted investment, places like China and India are becoming hot spots. Bamford believes that Asia will be a key driver of growth in the insurance market in the coming years.
Amid these changes, the W&I insurance market is also evolving. Rates have dropped recently, but Bamford thinks they may have hit rock bottom. The influx of new players in the market has driven prices down, but this trend might be reversing as reinsurance markets demand better returns. Some of the new market entrants may struggle to survive, leading to a potential shake-up in pricing.
Overall, while the M&A landscape is shifting and presents new opportunities, investors must remain vigilant about the risks involved, especially in a world filled with political uncertainty.