Mid-Year Update: M&A Market Shifts and RWI Response

The first half of 2025 brought a subtle but notable shift in M&A momentum. While the market has not returned to pre-pandemic fervor (few, if any, suspected that likely), we are seeing some hopeful signs. Strategic buyers are increasingly active, stepping in where private equity appears to remain cautious. This trend is echoed by our colleagues in the M&A world and supported by recent reports from industry analysts.

According to EY’s July 2025 M&A Activity Report, S&P Global’s Q1 analysis, and Paul Weiss’s June roundup, several key themes have emerged:

• Deal value is up 50% year over year, even as volume declines.
• US private equity deal volume dropped 6% YOY in 1H 2025. While 6% is not a high percentage, it is telling of an industry that has long held an excess of dry powder.
• The energy sector continues to dominate, driving four of the 10 largest deals so far this year.
• The consumer sector, particularly health, wellness, and lifestyle, saw a 230% YOY increase in deal value.
• AI and digital transformation remain high-demand areas, with infrastructure investments showing resilience.
• Exit activity declined 14%, while continuation vehicles remain a steady presence in the PE world.

RWI Pricing: Navigating the Tightrope

As deal values rise, even amid lower volume, we’ve seen a slight uptick in representations and warranties insurance (RWI) pricing. This is a bittersweet shift for brokers and clients, if not underwriters.

The increase is modest, yet meaningful. With claims on the rise, sub-3% rates pose a risk to the long-term health of the RWI market. While competitive premiums are attractive to clients, underwriters must balance them against the need to maintain claim-paying capacity. RWI policies last up to seven years, making long-term financial stability essential. 

The equilibrium between affordability and reliability is fragile. If the market gets it wrong, the product becomes economically unviable, but if carriers don’t charge enough, they endanger their ability to pay claims. Time is running out to get this right.

We expect this pricing trend to continue, in line with deal activity and size. The sustainability of the RWI market will depend on how it responds to rising claims and evolving deal structures.

Looking Ahead: The “BBB” Effect and Regulatory Ripples

Avi Sinensky’s article, Three Big Beautiful M&A Takeaways, offers a compelling look at how recent regulatory developments—particularly the One Big Beautiful Bill Act (OBBBA)—may reshape deal structures. We hypothesize how these changes could impact RWI placement and coverage.

1. Asset Deals Become More Buyer-Friendly

The OBBBA tilts the playing field further toward buyers in asset transactions. Traditionally, asset deals are less frequently covered by RWI due to limited risk transfer. However, not all asset deals are created equal. We may see more creatively structured asset deals that transfer more risk while still capturing the advantages of the asset structure.