Managing Risks in Technology M&A: A Broker’s Guide
This article is the second in a three-part series about the role of insurance in tech sector mergers & acquisitions. It aims to help brokers navigate the process of securing a successful deal. Other articles in the series cover insurance risks and opportunities before and after a transaction.
In the fast-moving UK technology sector, mergers and acquisitions (M&A) remain a key driver of innovation and growth. In businesses ranging from early-stage software firms to established data analytics companies, M&A can help scale intellectual property, expand geographic reach, and accelerate development. Yet while the promise of synergy and expansion is exciting, it is during the deal-making stage — the complex middle phase of M&A — that the greatest risks emerge. It’s an important time to take a clear-eyed look at potential complications involved.
“For brokers advising technology clients, this middle phase presents both a challenge and an opportunity,” said Jon Preston, Technology Practice Leader at Travelers Europe. “Managing risk during M&A requires not only technical knowledge of insurance cover but also a strategic understanding of how technology businesses operate and evolve under pressure. Brokers who possess both become critical partners during these transactions.”
Prioritising risk management during M&A
Once negotiations begin, the M&A process can move at a speed that leaves little time for reflection. Amid legal and financial discussions, risk management can be relegated to a checklist exercise. This is a mistake — especially in technology transactions where intangible assets, data security and regulatory compliance form the backbone of enterprise value.
Further, when the cultural alignment of the combined entity is overlooked, its objectives, leadership styles and ways of working may not fit. This can result in culture and leadership clashes, weakened integration and the loss of key talent once the deal is complete. By thoughtfully moving through the steps of a transaction, brokers can help risks come to the surface early on so they can be managed in time.
The transaction process often brings about changes in risk management strategy. In fact, according to insights from a 2025 Travelers Special Report, Today’s M&A trends – What Technology Risk Teams Need to Know, nearly all technology companies surveyed (91%) said they changed their risk management practices following a merger or acquisition.1
So what do they wish they had known earlier? The report highlighted some persistent vulnerabilities that could undermine a deal’s success: data breaches, gaps in cover, and cultural integration failures were key examples. The consequences of overlooking key exposures can be steep: in the UK, where the Information Commissioner’s Office (ICO) enforces some of the world’s strictest data protection standards, the cost of mismanaging risk can extend well beyond financial losses. For this reason, it’s critical for a business considering M&A to have a framework in place for measuring and prioritising the risks it faces.
For brokers, the middle phase of M&A is therefore the point at which specialist insight can deliver critical value. Here are some key areas that call for special focus, along with some examples of how overlooked risks can generate costly consequences:
1. Anticipating data security and cyber risks
Every M&A deal in technology involves sensitive data — customer records, intellectual property, proprietary algorithms, and R&D data. Transferring, merging, or reconfiguring these systems exposes vulnerabilities that cybercriminals are quick to exploit.
These risks underline the importance of cyber due diligence that goes beyond standard IT checks. Brokers can add value here by ensuring their clients are protected from both a risk management and insurance perspective. On the risk management side, they can help conduct cybersecurity assessments to identify vulnerabilities and apply a framework to prioritise and address them. From there, brokers can make sure insurance programmes cover both pre-existing and newly inherited cyber exposures. Cyber insurance should be evaluated in light of any system integrations, shared third-party vendors, or changes to data handling practices.
Scenario 1: Hidden breach in fintech acquisition
Situation:
A UK fintech acquires a smaller payments provider, later discovering the target’s network was compromised months before completion — exposing sensitive customer data.
Risk:
The acquirer inherits breach liabilities under UK GDPR, faces ICO scrutiny, and experiences reputational fallout as partners suspend integrations. Response and legal costs exceed £2 million.
Lesson:
Align cyber cover limits and incident response plans with the combined entity’s expanded risk profile. Specialist cyber due diligence — and insurance structured for acquisitions — can prevent a hidden breach from becoming a costly and damaging crisis.
2. Closing regulatory and compliance gaps
Technology M&A transactions are increasingly shaped by compliance pressures. The UK’s regulatory environment — especially under the Data Protection Act 2018 and UK GDPR — places strict accountability on data controllers. Still-evolving AI regulation may further complicate compliance obligations for technology firms engaging in AI-driven acquisitions.
Brokers can play a pivotal role by identifying and addressing regulatory protection gaps and advising clients about specialist solutions that address vulnerabilities.
Scenario 2: Overlapping data standards in technology merger
Situation:
A UK software company acquires an EU-based analytics firm, only to discover post-completion that the target had processed customer data under EU GDPR — without considering compliance with the UK’s standards.
Risk:
The acquirer inherits potential compliance breaches and must reconcile two regulatory frameworks. The ICO and EU data authorities request clarifications, creating costly delays and reputational exposure.
Lesson:
Collaborate with clients’ legal teams to map out potential cross-border compliance issues. Offer insurance solutions that mitigate exposure to fines, investigations, or litigation arising from legacy practices.
3. Building integration and business continuity frameworks
Even when a deal makes strategic sense, operational integration often reveals unforeseen risks. Systems incompatibility, duplicated functions, and divergent company cultures can all erode the anticipated value of a merger. Early on, it’s important to assess and align differences in processes, reporting systems, claims history and record-keeping. Otherwise, the new entity could be exposed to repeat accidents and regulatory scrutiny — as well as workforce disruptions that stand in the way of a smooth integration.
Studies suggest that integration delays and workforce disruption can significantly reduce productivity — impacting factors including sales, talent retention and customer satisfaction.2,3 To avoid those complications and others, it’s important to anticipate them during the transaction, not after it’s complete.
Brokers can help clients plan for continuity by reviewing business interruption insurance and assessing the potential for the loss of critical personnel that could destabilise product delivery or client relationships.
4. Reviewing protection gaps and insurance cover
One of the most overlooked risks in M&A is the potential for gaps in insurance cover to emerge between the buyer and the target company. Differences in policy terms, exclusions, or renewal dates can leave exposures unprotected during the critical transition period.
To prevent such outcomes, brokers can ensure there is M&A insurance in place that provides a bridge of protection during the course of a transaction. Policies including Professional Indemnity (PI) and Cyber liability commonly include automatic acquisition cover as standard to maintain protection when businesses grow through acquisitions. This built-in protection is especially valuable in the technology sector, where M&A activity is frequent, as it prevents insurance gaps during important business expansion phases. Reviewing the target’s entire insurance portfolio — including Cyber, PI, Directors & Officers, and Property policies — can ensure continuity and identify areas where additional protection or interim cover is needed.
Scenario 3: Insurance gaps during deal completion
Situation:
A UK software firm acquires a data-analytics start-up, but the target’s PI policy lapses during the closing process. Weeks after completion, a client files a service-delivery claim — yet neither the buyer’s nor the target’s insurance responds fully.
Risk:
This timing gap leaves the merged entity exposed to a costly uninsured loss, including legal fees, settlement costs, and reputational damage. The dispute also delays integration and revenue recognition.
Lesson:
Offer an insurance review service for continuous insurance oversight and alignment of renewal dates during M&A.
5. Embracing strategic and human-centric partnerships
For brokers, M&A is an opportunity to partner with clients through a period of significant transformation. Brokers who understand both the technical and human dimensions of M&A can position themselves as indispensable risk partners.
For example, brokers can point out tailored insurance products that protect against transactional risks. They can engage financial and legal advisors early to provide support. Beyond identifying complex exposures, they can translate risks into clear strategic options that open new doors for decision-makers. This helps clients to not only complete deals, but to protect the value they create.
Scenario 4: Integration risks undermine merger value
Situation:
A UK software provider merges with a smaller AI analytics firm to expand its product offering. Despite strong strategic alignment, post-completion integration exposes system incompatibilities, causing project delays and customer frustration.
Risk:
Workflow disruption and staff uncertainty trigger a temporary sales decline, reducing productivity and eroding early deal value. The acquirer faces higher service costs and missed revenue targets.
Lesson:
Operational and cultural risks can erode merger value fast. Encourage clients to review continuity plans before completion. Ensure cover extends to newly acquired operations from day one.
Turning risk awareness into resilience
The middle stage of M&A is where risk crystallises. In technology companies, it’s prime time for safeguarding intangible assets, maintaining compliance, and ensuring operational resilience.
“Brokers who help companies secure these protections can effectively manage risk as a deal crosses the finish line. In the process, they can help technology clients ensure that M&A remains not just a vehicle for growth, but a platform for sustainable innovation.”
Jon Preston, Technology Practice Leader
Travelers Europe
This article is provided for general informational purposes only. It does not, and it is not intended to, provide legal, technical or other professional advice, nor does it amend, or otherwise affect, the provisions or coverages of any insurance policy issued by Travelers. Coverage depends on the facts and circumstances involved in the claim or loss, all applicable policy provisions, and any applicable law.
Travelers operates through several underwriting entities in the UK and Europe. Please consult your policy documentation or visit the websites below for full information.
https://www.travelers.co.uk/ Sources:
https://www.travelers.ie/
1 https://asset.trvstatic.com/download/assets/2025-technology-m-and-a-special-report.pdf/2e4a2ffc930d11f08cd18668ee5e8a84
2 https://www.qmul.ac.uk/sef/media/econ/images/documents/Post-merger-Restructuring-of-the-Labor-Force_compressed.pdf
3 https://www.mckinsey.com/capabilities/m-and-a/our-insights/retain-integrate-thrive-a-strategy-for-managing-talent-during-m-and-a-transactions
