Identifying and Managing Risk During M&A Due Diligence

Mergers and acquisitions involve a wide range of financial, legal, and operational risks. One of the most important parts of any deal is how thoroughly those risks are identified and assessed during the due diligence process.

While deal value and speed often take center stage, the outcome of a transaction is shaped just as much by the depth of diligence and how risk is managed. In a recent roundtable discussion with Financier Worldwide, Nick Tuliebitz, AssuredPartners' Co-Head of M&A Insurance, North America, shared insights on the role of insurance in this process and why diligence is so critical to protecting both sides of a deal.

Following are key considerations for identifying and managing risk effectively during due diligence.

Quality diligence supports better insurance coverage

Transactional insurance policies, including representations and warranties (R&W) insurance, rely on the diligence process to determine what risks can be insured. If areas like the target’s financials, legal contracts, or tax positions are not professionally scrutinized, insurers may limit or exclude coverage for those topics.

Thorough diligence gives underwriters confidence, leading to broader protection. It also gives the buyer more negotiating power and allows sellers to exit with fewer retained liabilities.

Some risks require more specific solutions

Not all issues uncovered during diligence fall within the scope of R&W insurance. When known risks are identified, such as a potential tax exposure or unresolved legal matter, other insurance tools may be needed.

Tax liability insurance and contingent risk insurance can be used to directly address these known exposures. These products are tailored to specific scenarios and can help remove roadblocks that might otherwise delay or derail a transaction.

Claims depend on what happens before closing

A successful R&W insurance claim often depends on what is documented before the deal closes. Clear, well-organized diligence reports help insurers understand what was reviewed, what was disclosed, and how certain risks were handled.

Strong documentation also makes the claims process more efficient. It gives everyone involved a common understanding of what was known at signing and whether a loss falls within the scope of coverage.

Risk assessment requires collaboration

Identifying risk requires coordination between legal, financial, and insurance advisors who understand both the details of the deal and the broader implications for the target business.
An experienced insurance advisor can help structure the right coverages based on the findings of diligence. In many cases, insurance can be used strategically to bridge gaps, reduce escrow requirements, and support cleaner exits.

Risk identification is a key part of getting deals done the right way. It supports better negotiations, smoother closings, and stronger outcomes for all parties. With the right team in place and a focus on diligence, insurance can play an important role in helping transactions move forward with greater confidence.

At AssuredPartners, our M&A insurance team works closely with clients and their advisors to provide smart, effective solutions that align with the practical realities of each deal. If you’re planning a transaction or navigating a complex exposure, we’re here to help.