Transaction liability insurers eye opportunity from secondaries as Trump's tariffs slow M&A

By Aidan Gregory

April 8 - (The Insurer) - Transaction liability underwriters are poised to benefit from an acceleration in activity in the secondaries market amid a pause in M&A transactions following the introduction of U.S. President Donald Trump's sweeping trade tariffs.

• U.S. President Donald Trump's tariffs will create 'opportunities' in transaction liability: CFC

• Market volatility has caused a slowdown of global M&A volumes in 2025

• Impaired exit markets are fuelling record secondaries growth

Angus Marshall, head of transaction liability at CFC in London, said this year was set to see transaction volume in secondaries hit another record high.

The volatility from the trade war will continue to impede IPOs and M&A, forcing financial sponsors to hold assets for even longer, and intensifying the need among limited partners and general partners for liquidity via the secondaries market, he said.

“There will be opportunities in the buyout market as a result of these tariffs, and not just short-term, but medium-term opportunities, and some welcome structural changes to the market, notwithstanding the challenge around rates,” said Marshall. “Specifically, secondary is one opportunity that we see growing.”

Due to the sell-off in global equity markets, he said many institutional investors will now be forced to reduce the weighting of alternatives in their portfolio, fuelling demand for transaction liability insurance.

“There is a reset of the alternative investments market driven by public equities,” said Marshall.

He said transaction liability insurers will benefit from the backlog of sponsor assets that need to be sold after more than three years of impaired exit markets since Russia invaded Ukraine in February 2022.

Last year, transaction volume in secondaries hit a record $162 billion, according to data from US investment bank Jefferies.

The second quarter will likely see a slowdown in M&A on the back of President Trump's tariffs, with companies holding off on making major strategic decisions.

“We're always downstream of the public equity market,” said Marshall. “It's a wait-and-see approach because this volatility is extreme.”

“There does seem to be a view that the volatility is short-term,” said Marshall. “It could well be that the U.S. is already or about to be in a recession, and that is going to cause some complications for the transaction liability market.”

Marshall added that a recession would not necessarily be a “net negative,” although it will cause a “widespread resetting of valuations.”

“The dry powder remains, the unsold portfolio companies remain,” said Marshall.

The first quarter of 2025 was expected to be a busy one for M&A, but volumes did not meet expectations, with Trump’s initial round of tariffs in February weighing on sentiment.

Globally, there was $937.3 billion of M&A transactions announced in the first quarter of this year, up from $830.8 billion in the fourth quarter of 2024, and $856.8 million in the third quarter, according to LSEG data. Volumes in Europe fell 22.1% to $159 billion across the quarter, LSEG data shows.

A senior insurance M&A broker in London said. “Narrative amongst our clients is very much seeing how the next few weeks play out; from the insurer side there has been a focus on how tariffs may affect a target’s business but so far, we haven’t seen anything excluded yet.”