Under Pressure: How Tax Insurance Supports Certainty in Cross-Border M&A

Under Pressure: How Tax Insurance Supports Certainty in Cross-Border M&A
August 26, 2025 5 mins

Under Pressure: How Tax Insurance Supports Certainty in Cross-Border M&A

Under Pressure How Tax Insurance Supports Certainty in Cross-Border MA

In a rapidly evolving tax environment, tax insurance is more than a safeguard — it’s strategic risk capital that unlocks value and accelerates deal confidence.

Key Takeaways
  1. Tax risk is rising fast: More than 70% of dealmakers see it as a growing threat to M&A success.
  2. From macro-economic volatility to shifting global tax laws, deal risks are no longer marginal.
  3. Tax insurance is a proven solution — it can protect against exposures, support execution and enhance deal outcomes.

Economic volatility, growing government deficits and shifting political priorities are changing the rules for M&A dealmakers. Complex regulations, especially around intellectual property and cross-border structures, are increasingly difficult to navigate — and a single, unexpected tax treatment can derail value. Tax insurance has emerged as a strategic lever within a resilient M&A risk strategy.

“In our uncertain future, dealmakers continue to seek greater certainty. Tax insurance provides assurance and is more critical than ever,” says Jessica Harger, Managing Director for M&A Transaction Solutions in North America. “Dealmakers planning for long-term success and maximizing deal value should place an even greater emphasis on this solution.”

Global Tax Risk: What’s Driving the Shift

Aon’s recent Buy-side: Tax for Growth report highlights what dealmakers already know: Tax risks are a growing obstacle to deal success. In addition:

  • Macroeconomic volatility, cross-border complexity and jurisdictional mismatch continue to create obstacles.
  • The Organization for Economic Co-operation and Development Pillar Two and Global Minimum Taxation has been identified by 46% of respondents in Aon’s Sell-side: Tax for Growth report as the tax reform most likely to impact deal success.
  • Global changes in enforcement efforts, such as 2025 budget cuts and staffing reductions at the U.S. Internal Revenue Service (IRS), lead to less predictable audit activity.1 This includes renewed scrutiny of complex M&A-related tax positions, and other high-risk areas under evolving tax policy.

How Tax Insurance Works

Tax insurance helps protect businesses when a transaction fails to qualify for its intended tax treatment by transferring the risk of successful tax authority challenges to an insurer.

“Tax insurance is a proven, cost effective and timely alternative to seeking tax rulings and clearances from tax authorities,” says Moujeeb Thami, Director of M&A Transaction Solutions in Europe, the Middle East and Africa. “It can mitigate potential cash tax liabilities and secure the value of tax attributes like NOLs and tax amortizable IP, particularly when sellers are pushing for value to be attributable to such assets.”

Where Tax Insurance Adds Value:

Tax insurance is tailored to the needs of complex deals — and can be structured to:

  1. Cover losses including taxes payable, interest and penalties, and gross-up amounts for tax due on insurance proceeds. It can also cover contest costs tied to the defense of the position and advanced tax payments (relevant in pay to appeal jurisdictions)
  2. Protect buyers from unforeseen pre-closing tax liabilities inherited by sellers
  3. Help resolve difficult negotiations when an acquisition target has a large tax exposure
  4. Cover indemnity obligation for pre-close tax exposures or protect against heightened tax issues rather than seeking a special indemnity
  5. Provide a backstop should an investment or tax position fail to qualify under different interpretations by covering assessed amounts (tax, interest) and defense costs, making the policyholder economically whole
  6. Manage longtail exposures relating to seller structural matters (e.g., non-resident capital gains tax), which can facilitate the release of trapped cash and wind up of structures
  7. Enable innovative deal structuring options by managing potential tax risks in relation to pre-sale or post-sale structuring

Real-World Examples: What Effective Risk Transfer Looks Like

Managing Transfer Pricing Risk in Post-Exit IP Restructure

A global business exited a joint venture but retained its U.S. and Canadian operations. As part of a post-exit IP restructure:

  • Existing licensing agreements were terminated
  • New agreements were implemented
  • Proprietary “know-how” was reassigned
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Transfer pricing exposures can emerge years after close. Insurance safeguards tomorrow’s earnings against today’s uncertainty.

Jessica Harger
Managing Director, M&A Transaction Solutions, North America
Securing Confidence in EU IP Re-Domiciliation

A multinational relocated intellectual property between EU jurisdictions as part of a broader restructure. Based on expert advice, exemptions from capital gains, corporate taxes and stamp duty were expected to apply. However, multi-layered exemption criteria and the complexity of restructuring steps created risk.

A bespoke tax insurance policy was designed to protect the tax-free treatment of the transaction in the face of a challenge — allowing the business to proceed with confidence and capital certainty.

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Tax insurance gave us clarity and coverage, freeing us to execute without compromise.

Moujeeb Thami
Director, M&A and Transaction Solutions, Europe, the Middle East and Africa

Beyond M&A: Expanding the Use of Tax Insurance

Appetite for tax insurance now extends well beyond traditional acquisitions. Coverage is expanding to:

  • Group restructures and holding company reorganizations
  • Transfer pricing positions
  • Sales, payroll and employment tax treatments
  • Tax residency and permanent establishment risks
  • Refinancings and asset transfers

Where there is commercial exposure tied to uncertain interpretation, tax insurance is increasingly the capital market’s instrument of choice.

Whether you’re navigating a carve-out, cross-border reorganization or defending asset value downstream, engaging early with risk structuring specialists matters. We help organizations unlock commercial optionality and deploy capital-backed tax solutions that support deal success.

Connect with our M&A team to discuss how tax insurance can work for your next transaction.

Aon’s Thought Leaders
  • Jessica Harger
    Managing Director, M&A Transaction Solutions, North America
  • Moujeeb Thami
    Director, M&A and Transaction Solutions, Europe, the Middle East and Africa

1 Fewer Agents, Fewer Audits: How IRS Staff Cuts Are Changing Enforcement, Kiplinger

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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