Cross-border M&A volumes are recovering from their 2023 trough, but the dealmaking playbook has fundamentally changed. Foreign-direct-investment screening regimes, antitrust scrutiny, industrial-policy subsidies and security-of-supply tests now sit at the centre of every transaction. Deals that would have cleared regulators in a month five years ago now routinely take nine, and the transactions that get done have often been redesigned beyond recognition by the time they close.
Why the old playbook no longer works
For three decades, cross-border M&A operated on a broadly liberal assumption: capital and corporate control could move across borders unless there was a specific reason to intervene. That assumption is gone. In its place sits a patchwork of FDI regimes in 37 major economies, each with its own thresholds, sectors of concern and review windows. The default is now scrutiny. Dealmakers who treat regulatory strategy as a late-stage filing exercise are consistently surprised by outcomes that shaped-shift the economics of the transaction.
The three behaviors of leading dealmakers
Early regulator engagement — often before a signed term sheet — replaces the old practice of presenting regulators with a closed deal. Structural remedies are designed in from the opening negotiation rather than bolted on in response to review questions. And contingency planning for partial-divestiture outcomes is rehearsed with the same seriousness as the base case. These three behaviors now distinguish the acquirers that get transactions done.
The new map of sensitive sectors
Semiconductors, advanced manufacturing, energy, critical minerals, biotechnology, AI and cloud infrastructure, dual-use technologies, sensitive personal data, and port and logistics infrastructure have all moved from light-touch review to full strategic scrutiny. Financial services and consumer retail, long considered sensitive in emerging markets, have now joined the list in multiple developed economies as well. Mapping the sensitivity of a target asset against each jurisdiction where the acquirer operates has become a pre-diligence activity, not a post-announcement one.
Deal structuring in a fragmented world
The cleanest 100% cash share acquisition is no longer the default tool. Joint ventures with pre-negotiated put-and-call mechanics, staged acquisitions timed to regulatory milestones, minority investments with governance rights that fall short of review thresholds, and carve-outs that isolate the sensitive portion of a target have all become part of the standard toolkit. The implication for boards is that the right transaction is often not the most elegant one on paper, but the one that can actually close on credible terms.
Industrial policy as both headwind and tailwind
For some acquirers, the same industrial policy that is scrutinising their deals is also subsidising their customers. The U.S. Inflation Reduction Act, the European Chips Act and equivalent measures in Japan, Korea and India are creating pockets of guaranteed demand that change the strategic calculus for M&A. Acquirers are increasingly buying supplier capacity in subsidized jurisdictions rather than chasing incremental market share in liberalized ones.
Geopolitics in the data room
Diligence now regularly includes supplier exposure to sanctioned jurisdictions, dependency on single-country inputs for critical components, and historical licence activity with entities on expanding export-control lists. Buyers that identify these exposures late find themselves either walking from otherwise attractive deals, or absorbing risks that the seller was uniquely positioned to understand. The better buyers have built dedicated geopolitical-risk functions that sit alongside financial and legal diligence.
Talent and retention in a contested deal
When regulatory reviews stretch into quarters rather than weeks, key talent at the target has time to weigh options. Competing bidders, customers and private-equity sponsors are opportunistic about those windows. Retention design that was previously boilerplate now needs to contemplate extended uncertainty, partial-closing scenarios and in some cases the possibility that the deal does not close at all.
The rise of reverse break fees that matter
Reverse termination fees tied to regulatory outcomes have risen sharply. In our sample of announced cross-border transactions over the last two years, median fees are 3.8% of equity value, up from 1.9% in the preceding cycle. Sellers now negotiate these provisions aggressively; boards on the buy side have to balance deal competitiveness against the real possibility of writing the cheque.
How winners pick their battles
The acquirers that are compounding through this cycle are not the ones attempting the largest deals; they are the ones picking targets whose strategic value survives even a worst-case regulatory remedy. Concentrated bets on sensitive assets are out of fashion. Portfolios of smaller, regulatorily-tractable transactions are doing the compounding. It is a less glamorous mode of dealmaking, and it is producing better returns.
Implications for boards
Three questions are worth asking at every board off-site. First, does our M&A pipeline assume a regulatory environment that no longer exists? Second, do we have the geopolitical-risk capability inside the organization, or are we still outsourcing judgment we should be building? Third, are we resourcing the deal teams for a nine-to-eighteen-month review environment, or are we staffing as if it is 2019?
A CEO action list
Review the sensitivity map for every target category. Pre-read with regulators in the two most demanding jurisdictions before presenting to the board. Design remedies in at negotiation rather than at review. Stress-test retention and customer plans against a nine-month close. Build reverse termination fees into the pricing model from the start. And make peace with the idea that the best deals this decade are often the ones you do not announce.