Navigating M&A Risks and Opportunities in the Technology Sector
This article is the first in a three-part series about the role of insurance in technology sector mergers & acquisitions (M&A). It aims to help brokers prepare clients for a successful deal. Subsequent articles cover insurance risks and opportunities during and after a transaction.
For UK technology firms seeking growth, mergers and acquisitions can be a fast-track to building scale and capabilities. But well before negotiations begin, insurance brokers play a vital role, helping clients navigate the process in a way that safeguards value and mitigates risk. Early involvement can highlight opportunities that enhance the deal’s eventual success.
M&A activity in the technology sector
Although overall M&A activity in the UK has softened in recent months, the technology, media, and telecommunications (TMT) sector has shown notable resilience. According to Experian, there were 1,770 TMT deals in 2024, representing nearly a quarter of all UK transactions.1 While the first half of 2025 saw overall deal volumes fall 16% year on year — and total value drop by half to £71 billion — activity in the TMT space has been robust, fuelled by investment in AI and digital transformation.2
Yet these advances also bring new and evolving risks.
Tech M&A offers a huge upside, but innovation always brings complexity. Brokers add the most value to these deals when they’re part of the conversation from day one.
Jon Preston, Technology Practice Leader
Travelers Europe
The role of brokers in technology M&As
Before a technology company embarks on an M&A path, it helps for them to dissect why they are doing so. Common drivers in the UK technology sector mirror global trends: M&A can offer access to intellectual property and R&D capabilities, especially around AI and analytics. It may drive a company’s geographic or customer expansion, or help them diversify their portfolio with adjacent products or services. These deals can create operational synergies by consolidating back-end tech infrastructure or cloud platforms and improving resilience across the supply chain.
When synergies are identified and confirmed in the planning stages, companies pave the way for a successful integration. BT’s £12.5 billion purchase of EE in 2015 is one example. The deal brought together the UK’s biggest mobile network with BT’s fixed-line and broadband services.3 The logic was straightforward: by pairing BT’s infrastructure with EE’s mobile business, the company could bundle mobile, broadband, TV and home phone under one roof. That mix also opened the door to cost savings and new revenue opportunities.4
Such outcomes are more likely when acquirers ensure their ambitions align with the realities of the target. Brokers play a key role here. They can provide a framework that helps clients determine what a good fit looks like, where gaps may exist, and if the M&A target aligns with the company’s strategic goals.
Key M&A risk considerations before a deal
The acquiring company can start by asking whether the target truly fits its long-term plans: does it expand the product lineup, open doors to new markets, or bring in valuable capabilities? It can then look at the market itself, assessing competitors, the strength of the brand, and any risks that need scrutiny. A deeper financial review helps confirm whether the price makes sense and whether the target’s earnings are solid. From there, it’s important to understand how well operations and technology would mesh, from supply chains to innovation pipelines, and whether the cultures and leadership styles can work together. Finally, buyers need to consider legal or regulatory hurdles, the biggest risks, and how easily the two companies could integrate. Many companies use a weighted scoring model to compare these elements side-by-side, so decisions aren’t driven by financials alone but by the full picture of long-term value.
“Thoughtful strategic planning helps reveal where the biggest vulnerabilities are — whether it’s a key technology resource, a patent issue, or a liability that could quietly erode value,” said Preston. “The acquiring company needs a baseline risk assessment to make sure a target meets basic standards around risk controls, governance, and compliance before they decide to move ahead with the deal or start integrating the business. Spotting any shortcomings before a deal progresses can make all the difference.”
Without careful planning, deals may swiftly go downhill post-completion. This occurred when Hewlett‑Packard (HP) paid US$11 billion to acquire UK-based Autonomy Corporation, hoping to shift into software and cloud services. Just a year after the deal’s completion, HP took a $8.8 billion write-down because it claimed Autonomy had misrepresented its financials.5 The deal is a cautionary tale of overpaying, doing insufficient due diligence, and failing to integrate two very different companies.
Building a blueprint for M&A success
Proper due diligence is the backbone of any tech M&A. It requires the acquiring company to have a core decision-making team for the project that includes experts in each area reviewing the deal, as well as a project plan guiding the integration. As a part of the team, brokers can engage with clients across these areas:
1. Identify gaps in cover
Even well-insured technology firms can have blind spots — especially when combining entities. Brokers should map the insurance portfolios for both sides of the deal (cyber, professional indemnity, D&O, warranty & indemnity, contingent business interruption) and identify overlaps, mismatches or missing slices of cover. Research from Travelers found that 32% of technology deals result in insurance programme changes post-merger in the US — a reminder that mid-deal rebalancing is common.6
2. Anticipate future claims
Imagine the deal is complete but cracks are showing. What went wrong? Financial losses arising from contractual statements made by the seller that turn out to be untrue or inaccurate could potentially be mitigated by a Warranty & Indemnity policy, which shifts the risk onto insurers. Anticipating potential claims can also help ensure the client has the risk management protection and practices it needs to manage problems down the line. For example, ensure both companies’ health and safety policies align during the integration process. Not doing this could lead to increased Employers’ Liability claims later. Furthermore, shareholder or regulatory scrutiny of directors’ public disclosures and management decisions may also result in claims against directors and officers. Understanding potential exposures can support executive-level decision making.
3. Scrutinise controls around cyber, data and security
Data is one of the most valuable — and vulnerable — assets in any technology merger or acquisition. Due diligence should map how data moves across systems — including third-party processors and cloud services — while reviewing historical security incidents and compliance with UK-GDPR and EU data laws. Brokers can add value by promoting a cyber M&A assessment to uncover risks like breaches or system failures, as well as reputational exposures.
4. Identify hidden risks in intellectual property & licensing
Intellectual property (IP) sits at the heart of most technology M&A deals — from algorithms and source code to patents and licensing rights. Due diligence should confirm clear ownership, check for open-source or third-party code, review any infringement disputes or royalty obligations, and ensure IP rights can transfer cleanly. Brokers can flag where IP risks could trigger indemnity claims or hidden liabilities that exceed standard professional indemnity cover.
5. Conduct a financial and liability stress test
The finance diligence team should run downside scenario models (e.g. revenue shortfalls, cost overruns, churn) while mapping liability exposures (contractual claims, product recalls, regulatory fines). Brokers can help by providing benchmarking data or scenario-planning workshops showing how insurance limits, retentions or cover terms fare in stress conditions.
6. Assess key-person retention risks
Technology is a people business. Losing founders, lead engineers or data specialists can jeopardise product roadmaps and client confidence. Brokers should encourage clients to consider retention strategies before a deal announcement — especially since some buyers will demand retention packages.
7. Monitor regulatory & AI risk exposure
Across the UK and Europe, new rules on AI governance, automated decision-making and algorithmic liability are creating fast-moving risks. Brokers should help clients assess how AI-driven products could lead to future claims, how they can remain compliant with evolving legislation such as the UK AI Bill and EU AI Act, and how to quantify potential fines or litigation exposures. Conducting insurance due diligence can identify and transfer these emerging risks through tailored cover.
Early risk engagement isn’t just about avoiding surprises — it’s about understanding how value can be protected and even enhanced. The right scenario planning can turn potential deal-breakers into negotiation advantages.
Jon Preston, Technology Practice Leader
Travelers Europe
Preparing an insurance blueprint ahead of completion not only prevents last-minute gaps but also protects valuation and boosts deal certainty. In a market defined by rapid innovation and caution, early, strategic engagement is where brokers can make the greatest impact.
Top 5 pitfalls in pre-M&A insurance due diligence
Finally, before moving on to the next stage of a transaction, brokers have an opportunity to prevent potential mistakes down the line. Here are five important ones to help clients avoid:
1. Incomplete risk disclosure from the seller
Too often, the seller’s risk profile is accepted at face value. Missing details on pending claims, cyber incidents, or legacy liabilities can distort valuation.
Tip: Request full loss runs, incident logs, and regulatory correspondence early in the process.
2. Delaying insurance discussions
Targets and acquirers frequently operate with different policy structures, limits and retentions. But often, insurance programme placement and alignment are deferred until the final stages of a transaction. These mismatches can mask uninsured exposures.
Tip: Discuss insurance early in the process to compare cover across key policies and identify overlap or gaps before terms are signed. It facilitates a smoother deal and more advantageous outcomes for all parties.
3. Underestimating cyber and data exposures
Legacy systems, outdated encryption, or shared cloud environments can hide major breach risks.
Tip: Recommend a dedicated cyber due diligence review to assess incident history, vendor dependencies, and data protection compliance under GDPR.
4. Ignoring key person dependencies
A strong tech target may depend heavily on a handful of developers or founders. If they leave before completion, the deal could lose critical value.
Tip: Identify essential personnel early and evaluate whether retention measures are needed as part of the risk mitigation plan.
5. Overlooking regulatory and IP exposures
Rapid growth can leave smaller tech firms non-compliant with new AI, data or export regulations — or unclear about IP ownership and licensing chains.
Tip: Include legal and insurance counsel in IP and regulatory due diligence to confirm transferability of rights and insurability of potential liabilities.
By flagging these pitfalls during due diligence, brokers can help clients preserve value and negotiate from a position of confidence.
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/
https://www.travelers.ie/
Sources
1 https://www.experian.co.uk/content/dam/marketing/uki/uk/en/pdf/MarketIQ-Report-FY-2024.pdf
2 https://www.experian.co.uk/content/dam/marketing/uki/uk/en/pdf/MarketIQ-Report-H1-2025.pdf
3 https://www.reuters.com/article/business/bt-seals-ee-deal-to-dominate-british-telecoms-market-idUSKBN0L82AV/
4 https://www.reuters.com/article/technology/bt-dips-toe-back-into-britain-s-consumer-mobile-market-idUSKBN0ML0P9/
5 https://business.wisc.edu/centers/nicholas/blog/hewlett-packard-auditing-implications-of-the-autonomy-acquisition/
6 https://www.travelers.com/resources/business-topics/business-risk/risk-professional-mergers-acquisitions-insights
