Deal Insurance Demand Rises as Buyers Guard Against M&A Risks

Demand for representation and warranty insurance (R&W), also known as warranty and indemnity (W&I) insurance, is projected to surge across global mergers and acquisitions in 2026. The growing reliance on transaction risk insurance highlights a cautious return of dealmaker confidence, even as corporate boards navigate persistent geopolitical friction, complex regulatory scrutiny, and widening valuation expectations.

According to the fourth edition of the Global M&A Trends and Risks report published jointly by global law firm Norton Rose Fulbright and Mergermarket, 58 per cent of surveyed executives expect their use of R&W or W&I policies to increase this year compared to 2025. Within that cohort, 32 per cent anticipate a significant rise in policy adoption. The appetite for transaction risk mitigation is particularly pronounced across emerging growth corridors in South and Southeast Asia, as well as throughout Africa.

More broadly, corporate sentiment regarding overall transaction volume has rebounded sharply. The survey reveals that 52 per cent of business executives expect global dealmaking to expand in 2026 relative to the previous year, with 20 per cent forecasting a significant uptick. This marks a notable shift from last year’s findings, where a modest 38 per cent of respondents anticipated market growth.

The technology sector is set to lead cross-border M&A expansion, with 67 per cent of participants identifying it as the primary sector for international growth, outpacing industrials and energy. Within technology, interest in artificial intelligence (AI) continues to escalate rapidly. Seventy-eight per cent of respondents named AI as the most attractive sub-sector for dealmaking opportunities this year, up from 60 per cent in 2025. Approximately 24 per cent of all respondents—rising to 38 per cent among private equity firms—are actively targeting acquisitions of companies with heavy AI integration, while another 14 per cent are focused on acquiring pure-play AI enterprises.

Undeployed capital held by private equity firms, commonly termed dry powder, will serve as a major catalyst for market momentum. Forty-eight per cent of dealmakers listed private equity dry powder as a top-three driver of transaction volume, closely followed by broader industry consolidation at 45 per cent and corporate divestments of non-core assets at 37 per cent.

On the capital supply side, private credit remains a vital pillar of acquisition financing. An overwhelming 86 per cent of executives confirmed that private credit providers will remain a primary funding source over the next two years. Furthermore, half of those surveyed expect debt financing conditions to ease, with 19 per cent anticipating a marked improvement in borrowing terms.

Regional activity is expected to remain robust across major economies. The United States and Europe lead global expectations, with 48 per cent and 43 per cent of respondents respectively predicting a significant increase in M&A activity in those markets. Confidence is similarly building across the Asia-Pacific region, driven by supply chain restructuring and corporate divestitures, while Canada showed exceptional optimism, with 57 per cent of respondents forecasting increased deal velocity.

Despite the prevailing optimism, structural hurdles remain. Disagreements over target valuations have emerged as the single largest barrier to closing transactions in 2026, cited by 48 per cent of respondents as a top-three concern. This marks the first time in recent years that valuation gaps have outranked geopolitical uncertainty (39 per cent) and financing constraints (37 per cent) as the leading deal-breaker.

On the regulatory front, antitrust enforcement was identified as the chief obstacle, drawing an average of 35 per cent of top-two responses globally. Sanctions and anti-corruption compliance followed closely at 32 per cent, while foreign direct investment (FDI) screening regimes were cited by 26 per cent of participants.

Raj Karia, global head of corporate, M&A, and securities at Norton Rose Fulbright, observed that dealmakers are returning to disciplined, strategy-driven transactions after a prolonged period of market disruption. He noted that while regulatory and geopolitical pressures persist, market participants are adapting through innovative deal structuring, private financing solutions, and targeted investments in high-growth areas like AI.