I. The era of intangible dominance
For much of the past decade, M&A was shaped by businesses whose value was largely independent of the physical world. Software and IT companies set the pace. They scaled quickly, required limited capital and could expand without being held back by factories, logistics or infrastructure.
W&I underwriting adapted to this environment and the key questions were mostly legal in nature. Buyers and insurers focused on whether intellectual property had been properly created and assigned, whether open source software created hidden obligations, and whether data was handled in line with regulation. In many transactions, the central issue was whether the buyer truly owned and could freely use what it was acquiring (namely, the software).
This approach matched a market in which value was driven by intangible assets and where growth was not limited by physical capacity.
II. The return of constraints
That picture is now changing with the exponential growth of AI-solutions and the areas of business which take over one by one. Software remains important, but it is no longer the only source of advantage. As technology becomes easier to build and replicate, attention shifts to what cannot be copied so easily.
What stands out is not only physical assets on their own, but businesses that combine software with real world application. Manufacturing companies, and any business services actually, gain an edge when digital systems improve productivity. Energy platforms increasingly rely on software and AI to optimise output and manage complexity. Data centres are valuable because of power access and location as much as for their technology.
In other words, the strongest businesses today often sit at the intersection of software and the physical world. They use technology to enhance assets that are limited by nature. The M&A activity reflects this trend shift. There is growing interest in the physical world, not limited to infrastructure, energy, advanced manufacturing and logistics, but rather expanding to businesses which offer tangible physical services "in the real world". These businesses depend on inputs, employees, permits andlocations that cannot be expanded overnight. They operate within clearconstraints, and those constraints shape their value.
For M&A, this changes the perspective. It is no longer enough to confirm that an asset is transferable and scaleable. It also matters how it performs in practice, how dependent it is on its environment and how flexible it is when conditions change.
III. A recalibration of W&I focus
For W&I insurance, this is not a break with the past, but a shift in emphasis. Risk becomes more closely linked to how a business operates day to day.
One example is dependency: In software deals, contracts often describe relationships that can be adjusted if needed. In more asset focused businesses which require actual appliances and people to generateor deliver their product or service, dependencies are harder to change. A smallnumber of key suppliers, a reliance on a specific region or access to certain infrastructure can be critical. When these points are clearly identified indiligence, they can be assessed and reflected in underwriting.
Regulatory matters also become more important, when coming from a regulatory-light environment in which most IT services operated in. Permits, environmental requirements and operating approvals usually affect more strongly how a business with physical products can run. Where diligence provides clarity, these aspects can be included in the overall risk picture.
There is also a renewed focus on people's relationships to assets in a more traditional sense. Title to land and equipment, the validity of security interests and the way a trained workforce can operate the assets (with or without the help of AI tools) become more visible. These topics have always been part of transactions, but they carry more weight when value is tied to physical assets.
Another development is how different types of diligence come together. Legal findings are considered alongside commercial and operational reports. This gives a more complete view of the business and allows risks to be understood in context.
This macro-economic trend highlights the role of W&I insurance as a facilitator of M&A deals. As long as risks are identified and analysed during diligence, they can be structured and addressed within a policy.
W&I insurance has always moved with the market: It has adapted to different sectors, deal structures and risk profiles and the shift from code to concrete is simply another step in that process. W&I follows where value and risk sit in a transaction and adjusts accordingly.
