De-Risking M&A in Financial Institutions: Strategies for Smarter Deals in Uncertain Markets

De-Risking M&A in Financial Institutions: Strategies for Smarter Deals in Uncertain Markets
June 11, 2025 11 mins

De-Risking M&A in Financial Institutions: Strategies for Smarter Deals in Uncertain Markets

De-Risking M&A in Financial Institutions: Strategies for Smarter Deals in Uncertain Markets

Against a backdrop of unsettled global markets, financial institutions can still capitalize on M&A opportunities by refining strategies and retaining focus on long-term ambitions.

Key Takeaways
  1. The possibility of protracted trade volatility created by recent and evolving tariff announcements has created ripples of uncertainty that have unsettled global markets.
  2. Pent-up demand and significant market liquidity counter this challenge, which may drive dealmakers to right-size their asset portfolios to mitigate geopolitical risks through acquisitions or disposals.
  3. With a strategic focus on clarity of purpose and a data-driven approach, FI leaders and dealmakers can drive transaction momentum and deal success.

Geopolitical uncertainties and market volatility tempered dealmaking in the first quarter of 2025, with U.S. dealmaking volume dropping 13 percent when compared with 2024 activity. The deal total in Europe fell 32 percent over the same period.1 While the market had been brimming with cautious optimism about an anticipated rebound in deal activity, subsequent uncertainty around tariffs has seen confidence levels and investor appetite falter, as many dealmakers play a “wait and see” game when the fallout from tariffs turmoil becomes clearer. However, despite the challenges, substantial available capital and new capital sources could still drive momentum in the mergers and acquisitions (M&A) market this year.

Financial institutions (FIs) have a unique perspective on transaction challenges and opportunities, playing a dual role as both M&A advisors facilitating their clients’ activities and as dealmakers on their own account.

Opportunities and Risks Remain

In addition to pent-up demand, opportunities in growth industries are anticipated to help buoy M&A activity. Spurred by the rapid pace of digitalization, demand for digital infrastructure has been a catalyst for a gradual increase in deal flow, with data center-focused M&A deals in 2024 reaching a record-breaking $73 billion.2 The renewable energy sector, for example, will also benefit from this technical evolution, as record power demand enhances the attractiveness of power generation and infrastructure assets. In the U.S., power deal volume and value in the first two months of the year surpassed totals for the same period in all but one of the previous 20 years.3

However, against these growing opportunities, the dealmaking environment is also subject to escalating risks. In addition to global economic and political volatility, evolving cyber threats, human capital challenges and climate concerns have heightened dealmakers' focus on transaction risks, driving an increase in due diligence. Rising regulation and political involvement in dealmaking are also creating a dynamic shift that could slow the pace of transactions.4

De-Risking Transactions with Renewed Focus

In this shifting sands environment, FIs should embrace a revised approach to dealmaking. To capitalize on emerging opportunities for their own growth and resilience, while also strengthening their advisory capabilities, FI leaders must focus on three key areas:

  1. Developing and communicating clarity of purpose through strong leadership
  2. Utilizing rich data and market analytics to prioritize informed decision making
  3. Leveraging technology and risk management as growth-enablers

64%

The average due diligence process takes 64 percent longer (203 days) to complete compared to 124 days in 2013.

Source: Cautious M&A investors taking extra care with due diligence, Bayes Business School

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Despite market volatility, strategic leaders know that these global shifts also create opportunities. While organizations look to restructure their supply chains with increased focus on localized production, dealmakers will seek to diversify their portfolios in regions less impacted by tariff uncertainty.

Pete Rutherford
Global Financial Institutions Industry Leader, Enterprise Client Group

Factors Contributing to Transaction Underperformance and the Strategies Needed to Mitigate Risks:

  • People and Talent Management

    At their core, financial institutions are people-centric businesses — from the talent that fuels growth to the trust that builds client loyalty. In times of volatility or during the uncertainty of the transaction process, the strength of these relationships can be the difference between success and failure.

    Retaining critical talent and managing the drain of contacts and knowledge helps businesses maintain operational continuity, safeguard their reputations and preserve company culture during the integration process. Reconciling differing corporate cultures can be a challenging stumbling-block, particularly when larger companies with more rigid corporate cultures and structures acquire smaller organizations with more agile and flexible processes. Fault lines can also appear when leaders fail to set realistic expectations, for example, understanding the time and resources needed to manage and integrate complex processes such as employee benefits. 

    Achieving a smooth transition is about going deeper than merely communicating the “what” and the “how” to stakeholders; it’s about actively engaging the people involved to clearly convey the “why.” Articulating a long-term vision helps employees, clients and investors better understand the strategic objectives and purpose, fostering their buy-in through the process. With a strong people strategy and robust change management communication, leaders can drive better cultural alignment through the M&A process.

    Consider leveraging human capital transaction advisory support to drive deal success:

    • M&A total rewards strategy helps design a strategy that maximizes return on your people investment, retains talent and ensures a cohesive pay strategy.
    • M&A strategic communication change uncovers gaps in your messaging and devises communication strategies that keep employees engaged.
    • M&A human capital due diligence can identify and mitigate people-based liabilities and risks during a merger or acquisition.
    • M&A organizational and talent planning supports streamlined HR spending and forecasting of future workforce requirements. As digitalization drives a skills evolution within the FI industry, skill sets are becoming more sector-agnostic, creating new opportunities for talent attraction.
     
  • Digitalization and Technological Efficiencies

    The advent of artificial intelligence (AI) is reshaping the operating environment for almost every industry, creating new efficiencies and uncovering growth opportunities. Digital assets have become fundamental to how businesses operate and drive growth today, yet the rapid pace of development is not only reshaping the types of deals taking place, but the nature of the deals themselves. 

    Dealmakers today are having to reevaluate value creation and risk alongside new and exciting digital possibilities. This creates business value in the face of new threats in cyber crime and increasingly rigorous data regulations. Cyber criminals are actively exploiting gaps in the cyber defences of recently acquired companies. Organizations with inadequate insurance coverage and cyber readiness plans that do not align with company growth are particularly vulnerable in this evolving risk environment. 

    As a result of increasing threats, governments and regulatory bodies globally are enacting stricter and more severe laws and penalties to combat escalating cyber crime and data breaches. Fines can amount to 4 percent of an organization’s global turnover in Europe, up to 10 percent of annual turnover in Singapore and a maximum penalty of 20 years in federal prison in the U.S.5 Irrespective of geography, the damage from reputational harm can be even higher.

    Despite the threats, dealmakers can leverage significant advantages from evolving digital advancements, such as AI. For example, through improved data analytics, dealmakers can gain deeper insights about their targets, while automation helps increase the pace of the due diligence process, speeding up transaction timetables. Data is a powerful tool for dealmakers, but it is only by utilizing the richness of data and market analytics that dealmakers can make more informed, strategic decisions that drive successful outcomes. 

    Although cyber incidents increased in 2024, the Errors and Omissions (E&O) market remains competitive. Businesses have continued to enhance their cyber controls, leading to reduced risk retention, better pricing and enhanced terms within the cyber and tech E&O market — actions that have seen a 15 percent year-over-year improvement in critical security controls within the FI sector. Overall, organizations have invested in better cyber preparedness, helping to reduce claim payments by as much as 77 percent in the U.S. alone, according to Aon data. However, even as organizations continue to enhance cyber controls, risks still exist that threat actors may exploit.

    To gain a competitive advantage in this environment, it’s important to evolve existing cyber strategies and adopt innovative solutions:

    • Employ cyber transaction advisory support to achieve the best valuation for the least amount of risk. 
    • Conduct deeper and broader due diligence across an array of risks to go beyond identifying vulnerabilities, leveraging data and analytics to quantify potential losses and articulate remediation strategies.
    • Protect against future liabilities in an increasingly uncertain world with litigation risk insurance.
    • Leverage AI to enhance due diligence processes, including correlating cyber exposures with insurance data to inform decision making.
    • Utilize transaction liability insurance products (such as reps and warranties insurance (U.S.)/warranty and indemnity insurance (EMEA/APAC)) to transfer the risk of cyber incidents, data regulatory non-compliance, system downtime and customer claimants.
  • Economic Volatility and a Tightening Regulatory Environment

    In the wake of a sustained period of macroeconomic volatility and challenging financial conditions due to high interest rates and inflation, dealmakers have been forced to diversify their transaction strategies. Increased use of insurance products like tax insurance and contingent risk insurance is helping dealmakers to facilitate M&A deals, optimize balance sheets, overcome negotiation obstacles and provide certainty in ambiguous situations.

    As risks evolve, so has regulatory scrutiny and enforcement — from merger control and foreign direct investment regulations to the EU foreign subsidies regime. The impacts of the current dealmaking environment have increased risks and extended the due diligence process.

    At the same time, collective concern about the global climate challenge from investors, policymakers, employees and customers alike is increasing pressure on FIs to make meaningful decisions and deliver demonstrable action. The global investments needed to address climate change are estimated to be in the trillions of U.S. dollars, with investments in infrastructure alone requiring about $6 trillion per year up to 2030.6 While there have been some readjustments around timelines to meet sustainability targets, it is vital that FIs maintain momentum to avoid the reputational and litigation risks of greenwashing.

    In a competitive environment where alternative options are readily available, the ability to demonstrate stability matters, because unsettled customers can significantly impact deal value. Strong leadership and clarity of purpose, combined with data-driven decision making, are the key to steadying the ship in uncharted waters. When armed with market-leading insights, dealmakers can make decisions that help to optimize the balance between risk tolerance and risk transfer.

    Harness the power of data and technology to make better risk capital decisions:

    • Build robust systems and controls that deliver better risk oversight to foster the integrity needed to mitigate reputational risks.
    • Uncover the value of risk financing analytics to evaluate different risk strategies and identify the most efficient insurance program.
    • Utilize more efficient risk transfer structures and market facilities to improve execution speed and access to risk capital. 
    • Leverage data insights to stress test how an asset will perform against specific challenges, such as capital constraints and regulatory compliance.

12%

There was a 12 percent decrease in greenwashing risk globally in 2024, but incident severity is up 30 percent.

Source: Decrease in greenwashing for first time in six years, RepRisk

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From Uncertainty to Opportunity: Optimizing Transaction Dynamics to Create Value

Uncertainty and risk are inherent challenges in M&A transactions, but also critical factors in creating opportunity and the potential for additional value. By managing risk and complexity through a comprehensive approach, dealmakers can build pathways to clarity and efficiency, while innovating to unlock greater value from the process. Smart tacticians do not seek to eliminate risk; they calculate it, then capitalize on it.

In an increasingly complex environment, dealmakers must strike a balance between thorough due diligence and maintaining transaction momentum. With innovative solutions and a clear sense of purpose, they can ensure that comprehensive risk assessment does not come at the cost of agility and ultimate success.

 

1 Trump tariffs hinder M&A and IPOs in what was supposed to be a blockbuster quarter, Reuters
2 Data: 2024 sets new benchmark for data center M&A deals, Digital Infra Network
3 AI to fuel bumper year for M&A in US power sector, Reuters
4 Trump tariffs hinder M&A and IPOs in what was supposed to be a blockbuster quarter, Reuters
5 Top 5 Cyber Threats To Mergers and Acquisitions, Aon
6 Climate change and financial risk, IMF

Aon’s Thought Leaders
  • Pete Rutherford
    Global Financial Institutions Industry Leader, Enterprise Client Group
  • Paul LeVasseur
    M&A Consulting Leader, Aon M&A and Transaction Solutions, North America
  • Dominic Rose
    Head of Corporate Client M&A, Aon M&A and Transaction Solutions, Europe, the Middle East and Africa

General Disclaimer

This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.

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