Mergers and acquisitions (M&A) have long been a barometer of economic confidence and strategic ambition. With 2026 underway, the M&A landscape is continuing to show signs of an uptick from the previous year. This resurgence is clear in the financial services sector, where institutions are pursuing deals to bolster their positions amid rapid technological evolution and shifting market dynamics. Financial institutions announced over 2,000 deals throughout the majority of 2025. Within this article, we explore the drivers behind this activity, the reasons activity could persist, corporate integration risks and insurance solutions to mitigate them.
The broader corporate universe has seen M&A activity climb due to a confluence of macroeconomic factors. Interest rates, though relatively elevated as compared to the past 25 years, have been decreasing. Over the past year, central banks like the Federal Reserve and the European Central Bank have reduced borrowing costs, making it easier for companies to finance acquisitions. The financial sector stands out for its intensity, driven by unique pressures and opportunities.
Other drivers for M&A are the quest for scale and technological prowess in an era dominated by digital transformation. Banks and insurers are buying fintech startups and digital platforms to enhance capabilities in areas like AI, blockchain and embedded finance. Regulatory changes, such as relaxed scrutiny under evolving antitrust frameworks, could also encourage more deals, particularly in the U.S. Customer demand for seamless, tech-driven services further propels this, as seen in deals aimed at acquiring new products, skills, or lines of business. However, some companies have paused pending deals due to the uncertainties associated with U.S. tariff negotiations.
That said, this activity is not a fleeting trend; experts expect it will accelerate through 2025 and beyond. In the financial sector, the need to share technology investments and achieve scale leadership will drive ongoing consolidation. Banks, facing margin pressures in a low-interest environment, view M&A as a path to efficiency and broader market share through economies of scale. Moreover, the rise of open banking and payment infrastructure innovations will intensify dealmaking, as institutions position themselves for a wave of fintech disruption. Private equity firms, sitting on dry powder, could fuel this activity with an uptick in announced deals.
This enthusiasm does come with hurdles, particularly during post-deal integration. Integration issues often derail the potential for earnings accretion, as some mergers do not achieve expected synergies. Financial risks, such as overpaying for targets or overestimating synergies, compound these factors. Inadequate due diligence can lead to hidden liabilities post-closing, from cybersecurity vulnerabilities to legal disputes. Cultural clashes can also appear. For financial institutions, a mismatch in the approach to regulatory compliance and risk management can amplify potential regulatory issues. Talent loss is another peril; key executives and specialists may depart or retire amid uncertainty, eroding institutional knowledge. Operational integration poses technical woes, such as incompatible IT systems or data silos, leading to service disruptions, customer dissatisfaction and discovery of unknown fraud. Antitrust reviews or compliance with evolving rules like the EU's Intermediate Parent Undertaking regime, can delay closings and impose unforeseen costs or lead to deal termination.
To counter these risks, insurance solutions can serve as vital tools in the M&A toolkit, especially for financial institutions.
During mergers, advisors, consultants and executives are exposed to claims of misrepresentation or inadequate disclosure. Errors in financial reporting, compliance, or valuation can lead to lawsuits and shareholders or regulators may allege professional negligence if the deal terms are disputed.
D&O and E&O products afford protection for Directors, Officers, other key professionals and the business entity itself from liability. D&O insurance is a vital risk management tool during purchase and sale transactions. It protects directors and officers from personal liability, mitigates transaction-specific risks and can enhance deal attractiveness. Buyers often require robust D&O insurance as part of the purchase and sale due diligence to ensure the target company’s leadership is protected against potential liabilities (see “Run-off” section below). Similarly, E&O coverage can protect businesses and professionals against claims of negligence, mistakes, or failure to perform professional duties.
RWI is designed to protect buyers in M&A transactions against losses from breaches of representations and warranties made by sellers to buyers during the sale, including in cases of seller fraud. By transferring risks associated with these representations, buyers proceed with confidence knowing the representations are backstopped by a reputable insurer, and sellers reduce or even eliminate any indemnity requirement.
EPL coverage protects businesses from financial losses due to lawsuits or claims made by employees alleging wrongful employment practices, such as discrimination, harassment, or wrongful termination. If there is a reduction in the workforce in the wake of or leading up to a purchase or sale, this product can help offset the costs related to litigation that may emerge as a result of the transaction.
From merging IT systems to the emergence of AI and digital platforms can pose significant challenges, including cybersecurity vulnerabilities, data migration issues and operational disruptions. Given the complexity of IT integration, insurers offer coverage for data breaches, system failures and cyber threats that may arise during or after the merger. Fidelity Bond insurance and Cyber risk management and insurance coverage are additional corporate risk management tools to offset the risks of unknown internal fraud discovered within the seller’s organization after acquisition close or help offset the costs incurred in the aftermath of data breaches or a system failure.
“Run-off,” or an extended reporting period, is conventionally obtained, and sometimes mandated by a purchaser, when an organization is acquired. Run-off extends coverage for claims reported after a policy expires or is canceled. Important clarifications for a policy put into run-off are “Straddle” and “Successor-In-Interest” coverage. For claims that straddle pre- and post-acquisition, if there is a lawsuit arising out of the transaction, plaintiffs may levy claims against individuals that “Straddle” their capacity as employees of both the target/acquired company and purchaser company. The straddle coverage clarification ensures pre-transaction acts are covered under the run-off policy. Likewise, “Successor” wording can be necessary to ensure that the successor-in-interest is entitled to insurance benefits under the run-off policy. Therefore, reviewing the language in existing, run-off, and go-forward policies is important to avoid potential coverage gaps.
In the financial sector, de-risking strategies utilize these insurance products to capitalize on opportunities amid volatility through specialized insurance products and services for mergers. By transferring risks to insurers, institutions can focus on value creation rather than potential pitfalls.
The uptick in M&A would reflect a maturing recovery in the corporate arena, with financial institutions at the forefront. While drivers like technology-based acquisitions and economic stabilization promise continued growth, integration risks demand vigilant management. As financial institutions continue to pursue M&A as a strategic lever for growth and transformation, the importance of proactive risk management cannot be overstated. Integration challenges, regulatory scrutiny and operational disruptions pose real threats to deal success. Insurance solutions offer a pragmatic offset, enabling bolder strategies. As 2026 unfolds, this trend evolves with the right insurance solutions and advisory support, institutions can mitigate these risks, unlock deal value and position themselves for long-term success in a competitive and dynamic market.
WTW hopes you found the general information provided here informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, WTW offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
