--- title: "Buyer Beware: What to Know About M&A Insurance Risks" url: https://burnaze.com/article/b2ebaf77-df4b-4453-8ca3-3ebd245a8296 source: "Pest Control Technology" original_url: https://www.pctonline.com/what-to-know-about-m-and-a-insurance-risks category: "Home Services" industry: "Home Services" published: 2026-07-07T09:00:00.000Z modified: 2026-07-07T13:01:18.186Z image: https://images.unsplash.com/photo-1581578731548-c64695cc6952?w=1600&q=80&auto=format&fit=crop --- # Buyer Beware: What to Know About M&A Insurance Risks **TL;DR:** Pest control operators navigating the M&A market must review insurance coverage and claims history during due diligence to avoid significant premium increases. The M&A market in the pest control industry is growing, with larger companies and private equity firms driving deal volume. *originally published in Pest Control Technology on 2026-07-07. [Read the original](https://www.pctonline.com/what-to-know-about-m-and-a-insurance-risks).* ## Story Completing a successful merger or acquisition (M&A) in the pest control industry requires a series of strategic behind-the-scenes steps. Buyers must identify the right target, craft a letter of intent (LOI), and conduct meticulous financial, legal, and operational due diligence. Regardless of how careful buyers are, however, they sometimes miss the critical step of reviewing a target’s insurance coverage and claims history. Make this mistake, and the newly merged entity could wind up with a significant premium increase that harms profitability right from the start. The M&A market generally continues to move at breakneck speed. Deal volume increased by 12% in the second half of 2025 compared to the same time one year earlier. Larger pest management companies and private equity (PE) firms have emerged as the main market players. Their interest is driven by multiple factors, but the biggest one is increased revenue opportunities. Pest control operators achieved 15.4% median revenue growth in the past year, with the middle 50% of operators growing anywhere between 5.7% and 28.9%, according to FRAXN’s recently released Pest Control Financial Performance Benchmark. Other factors making the space attractive include the recession-proof nature of pest control services and the recurring revenue generated by service contracts. However, because EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) margins remained relatively flat in the past year, per FRAXN data, growth alone won’t ensure success. Buyers must also manage costs as they expand their footprint, which is why understanding a target’s insurance history is essential. If a buyer fails to perform adequate checks into the insurance history of the firm it’s acquiring, it could affect their ability to secure coverage at a reasonable price. Companies with a subpar loss history will likely face a significant rate increase at renewal, and that increase will fall on the buyer once the deal goes through. To protect themselves, buyers should ask target companies to provide five years of loss history, including workers’ compensation claims, auto accidents, general liability incidents, and environmental exposures. Once they have the data, buyers should analyze trends related to claims frequency, severity, and resolution and ask the seller to close any open or extended claims. Buyers also need to understand how a merger will change the services they provide, and what impact those changes will have on their insurance coverage. To see why, consider a general termite and pest control company that chooses to acquire a company that also performs bed bug remediation. Such work requires heat treatments and chemicals that may not be covered under the company’s current policies. The best path forward in this type of scenario is for the buyer to have its insurance broker review its current policies and determine whether they may need additional coverage or an endorsement to cover the new work. Deal structure matters, too. Buyers purchasing another company’s assets are typically shielded from general liability claims, lawsuits, or workers’ compensation claims that occur prior to the closing date. The same is not true for stock purchases, which offer buyers tax advantages but carry greater pre-closing liability risks related to unresolved claims or pending litigation. Insurance-related matters aren’t the only risks buyers sometimes underestimate during the M&A process. They also need to ensure the target company is the right cultural fit. To assess culture, buyers should review the target company’s employment contracts and scrutinize its technician turnover rate. Buyers should also consider meeting with key employees in person, before closing, to understand their work ethic and determine how each worker will contribute to the merged company. The cleaner a company’s loss history, the higher the valuation it can achieve prior to a deal. For this reason, pest control operators looking to position their companies as a merger target should make insurance part of their pre-deal planning. Start by working with an insurance broker to review open claims and develop plans for resolving them. Sellers should also consider securing extended reporting period coverage (tail coverage), if available, to protect against claims filed post-sale for work done prior to the closing date. Doing so will ease potential buyers’ worries about inheriting liability. Proactive safety programs also make a seller’s business more attractive to potential buyers. When buyers see that a target company conducts routine workplace safety training, documents its safety-related policies, and uses technology like telematics to monitor driver behavior, they are further reassured of the long-term value of their investment. For both buyers and sellers, the heightened interest in M&A activity makes now the right time to prepare for a potential deal. Pest control companies that leverage the experience of a knowledgeable insurance broker with industry expertise can find hidden risks early and create deals that benefit parties on both sides of the table. ## Entities - Home Services (sector) - private equity (topic) - due diligence (topic) - Pest Control Technology (publication) - merger and acquisition (topic) - pest control industry (topic) - FRAXN (company) - ma insurance risks (topic) --- Originally reported by Pest Control Technology (https://www.pctonline.com/what-to-know-about-m-and-a-insurance-risks). Summarized by Burnaze (https://burnaze.com/article/b2ebaf77-df4b-4453-8ca3-3ebd245a8296).