Navigating volatility: How Andrea Foti and Aon are redefining risk in M&A

Andrea Foti stands at the forefront of Aon’s M&A and Transaction Solutions team as the chief commercial officer for Europe, Middle East, and Africa. Tasked with shaping distribution strategies, fostering a culture of continuous improvement, and advising clients on risk management and capital optimisation, his role is as dynamic as it is impactful.

With a career spanning nearly two decades in corporate finance – from stints at JP Morgan and Citigroup to leadership roles in independent advisory firms – Foti brings a wealth of experience to the table. His transition from investment banking to the insurance sector was driven by a vision: "Insurers are increasingly available to support clients in mitigating risks during M&A, starting with a range of solutions and continuously broadening their offerings."

Foti’s journey to Aon began in January 2020, when he initially led the Southern Europe region before stepping into his current role. Reflecting on his career, he notes, "I decided to move to this side of the industry because, while corporate finance was exciting, insurance is a growing sector with immense potential. Insurance capital in M&A was evolving from a simple risk-transfer tool into a strategic resource to unlock deals that might otherwise stall on W&I, tax, contingent liabilities or cyber risks."

Volatility in M&A and what it means for risk management and M&A insurance
Volatility has been a defining feature of the global M&A market for decades, and Andrea Foti has witnessed its ebb and flow firsthand. "It’s been very volatile. To be honest, I can’t even say when it started. My second day in the FIG team at Citigroup was September 11, 2001, so it was already volatile back then."

From the dot-com bubble to the 2008 financial crisis and today’s geopolitical tensions, AI disruption, and economic uncertainty, Foti has seen it all. Yet, he remains optimistic about the current landscape: "The market is positive this year – better than last year. Deals are happening, including large ones. Some countries are faster, but overall, there’s good and consistent activity."

Risk management in M&A has undergone a remarkable transformation, evolving into a critical component of dealmaking. As Foti explains, "It has grown and matured significantly."

When he joined Aon six years ago, solutions like Warranty & Indemnity (W&I) insurance were still in their infancy in various countries, and not all markets had embraced them. "As a banker, I had only worked on very few W&I insurance policies in my entire career because it wasn’t common."

Today, the landscape has shifted dramatically: "Now, probably more than 60 percent of deals, depending on the segment, are done with a W&I insurance policy."

This growth has been accompanied by the emergence of new products, such as tax insurance, which have followed a clear adoption pattern: "They often start in the US, then move to the UK. From there, they develop across the European markets, following the risk-yield curve."

The demand for M&A insurance solutions is primarily driven by sellers, who see them as a way to avoid the pitfalls of escrow and streamline transactions. Foti notes, "The insurance solution essentially puts a price on a risk that sits between the buyer and the seller."

For sellers, escrow is a major pain point: "For the seller, escrow is like kryptonite to Superman. They don’t want that; they want to cash out and invest or distribute the money."

While the seller often initiates the push for insurance, it’s ultimately the buyer who signs the policy, as they are the insured party. "If the buyer is insured, they can go directly to the insurance company for a claim, which makes the process much smoother."

Due diligence and the limits of coverage
The adoption of M&A insurance has expanded across sectors, though its origins lie in the most straightforward industries. As Foti explains, "It started mainly with real estate and renewables – back in the day, because those sectors combined repeatable structures, detailed diligence, clear risk buckets, and investor demand for clean exits."

Over time, however, the use of insurance has become nearly universal: "Today, even the most complex sectors have insurance policies. More expertise, focus, diligence, and strong buyer/seller demand have pushed insurers to develop products and underwriting approaches that can accommodate complexity by pricing it properly, carving out what can’t be covered, and insuring the rest."

The evolution has been driven by insurers’ growing ability to assess and price risks. While M&A insurance provides critical protection, it is not a substitute for thorough due diligence. Foti emphasises that insurers expect buyers to conduct "very extensive and standard due diligence" before underwriting a policy.

Certain risks, however, remain challenging to cover. For example, insurers typically exclude the condition of assets, as verifying the state of every machine or facility is impractical and not the market standard. Other common exclusions include forward-looking statements, pollution risks where no environmental due diligence has been conducted, and certain labour arrangements.

Tax insurance and cyber as grow areas
The M&A insurance market has seen significant expansion, but some areas still present untapped potential. Andrea Foti highlights tax solutions as one of the fastest-growing segments. What makes tax insurance particularly valuable is its ability to turn a potential deal-breaker into a manageable cost.

Foti illustrates this with a stark example: "Let’s say the deal value is 100 million euros. You have a low-probability tax risk of 15 million euros. So potentially, 15 percent of the enterprise value can swing depending on that tax risk."

For sellers, such risks are often dismissed as low-probability, but for buyers, they represent a significant potential liability. Insurance provides a clear solution: "With an insurance policy, you give a price to that risk, and it is a one-off cost."

Cybersecurity risk management is experiencing a boom as well, both as an insurance product and an advisory service. Foti notes, "Our team is currently seeing a boom in assessing and mitigating cybersecurity risks for our clients."

The process involves evaluating a target company’s cyber risks and quantifying potential exposure. For example, "The potential maximum exposure is several tens of millions of euros because of this and that risk. If you implement certain mitigations to reduce the risk, we can bring that exposure down to a fraction and then cover the remaining amount through an insurance policy."

By addressing vulnerabilities – such as weak authentication or unsecured web access – companies can significantly lower their risk profile, making insurance more affordable and accessible.

Real-world examples underscore the critical value of cyber due diligence in M&A. Foti shares an anonymised case where a buyer, initially uninterested in cyber due diligence, discovered a major vulnerability: "The passwords of the assets were on the dark or deep web. Someone had taken the passwords and thrown them out there."

The risk was immediate and severe: "The day after the M&A deal, a hacker could come in, block the system, and say, ‘Now, either you pay me X amount, or I keep your infrastructure blocked for days or weeks.’ The solution was straightforward – implementing new and stronger security measures – but the impact was profound.”

Knowledge management & innovation
Managing the vast and growing expertise required for modern M&A insurance – from tax and cybersecurity to W&I – is a complex but in-house endeavour at Aon. Foti emphasises the importance of local, specialised talent: "I can proudly say we have a fantastic team of talented professionals, with strong capabilities in originating transactions, delivering at the highest quality standards, and continually innovating for our clients."

With a European team of approximately 200 professionals, Aon ensures both breadth and depth of knowledge, though local presence remains critical. "Our M&A clients increasingly expect us not only to bring global expertise and product capabilities, but also to be present on the ground locally, with teams who understand their market, regulatory environment, and deal dynamics first-hand."

For certain solutions, central coordination from London is possible, but for others – such as tax, W&I, and insurance due diligence - local expertise and language skills are non-negotiable.

Leveraging AI: Acceleration, not replacement
While AI is transforming many industries, its impact on M&A insurance has so far been more evolutionary than revolutionary. Foti draws a parallel with the adoption of Excel in finance: "I often compare AI to Excel. When I started as a banker, Excel was the norm. You’d use it for discounted cash flows, trading multiples, M&A multiples – everything."

Before Excel, financial modelling was a laborious, manual process that could take days to adjust. Now, AI serves a similar purpose – accelerating workflows rather than replacing human expertise. "AI certainly facilitates parts of the execution process and makes things faster, but I don’t expect it to reduce our workforce at all. Instead, it allows us to do more business with more people – accelerating our work and growing our talent. In the end, also with Excel, once it became the market standard, the result was not fewer bankers, but more bankers doing more complex work. "

Aon’s approach to knowledge management and innovation is rooted in a blend of in-house expertise and strategic use of technology. The company’s ability to attract top talent is bolstered by its market leadership, as Foti notes: "Our leading position in most markets helps us attract and retain outstanding professionals, which ultimately benefits our clients."

Looking ahead in M&A insurance
The future of M&A insurance looks bright, with growing utilisation and a disciplined approach to innovation. Foti points to the recent Aon’s Global Claims Survey as evidence of a healthy market: "Our claims study shows an increase in claims, which is a positive sign. That’s how the product should work – there needs to be utilisation of the insurance solution without any pathological issues."

He expects this trend to continue, with insurers expanding their offerings in a measured way: "Insurers are showing intellectual interest in exploring additional solutions, but always with a disciplined and wise approach, avoiding risky or 'funky' moves that could destabilise the market."

For W&I and tax insurance, the focus remains on quality and solvency, ensuring that insurers can meet their obligations. Foti also highlights a shift toward smaller deals, as mid-market and lower mid-market clients increasingly adopt insurance capital to facilitate transactions. "The more clients, lawyers and tax advisors appreciate the solution, the more players who weren’t previously using it will start to adopt it."

Innovation will continue to shape the M&A insurance landscape in the years ahead. Foti foresees new frontiers, particularly in how insurance capital is deployed. "It’s still a market where we’re exploring new frontiers of innovation. Clients are asking us for innovative approaches."

One emerging trend is the portfolio approach for private equity firms, where a global insurance strategy replaces individual policies for each portfolio company. "Instead of each of their multiple portfolio companies having its own traditional insurance policy, they ask for a global approach – a platform to improve margins, achieve better coverage, and create value for their assets."

Credit and other financial solutions are areas where insurance capital can play a strategic role. Foti’s ambition is clear: "Our role is to bring insurance capital to the M&A table. It’s the same journey – we’ve just started more recently than the banks."

As Aon moves closer to the strategic level of conversations, the integration of insurance capital into M&A processes is set to deepen, offering new opportunities for dealmakers and their clients.