Navigating Geopolitical Forces within Cross-Border M&A (Part 1)

Cross-border M&A is undergoing significant changes due to heightened geopolitical tensions. While companies continue to pursue these types of transactions to expand markets, gain valuable resources, and achieve synergies, the environment has shifted. Since 2021, the share of cross-border deals in the U.S. relative to total M&A activity has steadily declined and is on track to fall again in 2025. Both inbound and outbound volumes have trended downward since 2021, reflecting a broader contraction in deal activity. Outbound transactions remain more prevalent across most major economies, with the U.S. and Japan showing stronger outbound focus, while Germany and Mexico continue to be more inbound-driven. These shifts suggest possible imbalances in cross-border flows and highlight the influence of evolving geopolitical and regulatory pressures on the cross-border M&A landscape. The tables below provide an overview of inbound and outbound cross-border volumes since 2021 among leading nations.

Source: S&P Global Market Intelligence. TTM = Trailing 12 Months

Source: S&P Global Market Intelligence. TTM = Trailing 12 Months

The mid-market—defined as deals ranging from $10MM to $200MM—remains a dominant force in cross-border M&A activity. In 2024, 61% of global cross-border transactions fell within the mid-market, with North American buyers accounting for 48% of the volume. Together, these trends suggest that heightened geopolitical risks and regulatory scrutiny may be playing a growing role in cross-border dealmaking, both in the U.S. and globally.
Beyond deal size, examining which industries are driving volume sheds more light on cross-border M&As. The chart below displays the industry distribution of cross-border M&A activity for the U.S., U.K., and China.

In the U.S., Information Technology accounts for nearly 30% of deal flow, while in China, activity is concentrated in the Consumer sector at over 25%. The U.K. shows a more balanced profile, though Industrials and Information Technology stand out as key sectors. Overall, the data reveals distinct national preferences: U.S. dealmaking is heavily tech-oriented, China prioritizes consumer and industrial sectors, and the U.K. maintains a more diversified spread across industries. These concentrations are significant as many of the most active industries, such as technology and industrial sectors, are also those most exposed to geopolitical tensions and regulatory scrutiny in cross-border dealmaking.

Geopolitical Shifts Redefine the M&A Landscape

Geopolitical risks have increased sharply in recent years, driven by ongoing wars, heightened U.S.—China tensions, the expansion of sanctions, and broader global political instability, with their scale, complexity, and impact on the international order reaching the highest levels since the end of the Cold War. As a result, geopolitics now plays a more decisive role in M&A than ever before, especially in M&A pricing. Typical valuation methodologies, such as the discounted cash flow (DCF) method, are becoming increasingly difficult to apply in today’s cross-border environment. Companies pursuing acquisitions in conflict-prone regions are applying a 10–15% geopolitical risk premium to account for the additional returns required to compensate for the risks specific to those regions. However, this premium only adds to the most common barrier to deal completion: valuation gaps between the buyer and seller. When the added risk premium is layered on top of already divergent price expectations, companies become even more reluctant to engage in cross-border M&A, underscoring how geopolitical forces are reshaping not only how deals are priced, but whether they happen at all.

These dynamics are evident across multiple regions. For example, European firms are increasingly redirecting M&A investment toward politically stable markets like the United States, attracted by its resilient economy and favorable regulatory environment, where reduced political uncertainty makes pricing risk far less of a concern. American companies themselves are also prioritizing domestic investment, reducing their exposure in Europe, the Middle East, and Africa (EMEA), as well as Asian countries. In the first half of 2025, U.S. acquirers allocated 91% of total deal value within the Americas, up from 86% the prior year. Asian acquirers have also shifted their focus, more than doubling their investment into American companies during the same period; the region accounted for 22% of Asian M&A transaction deal value, compared with 11% a year earlier. Similarly, EMEA buyers increased their M&A investment in the Americas, even as overall year-over-year deal values across the region declined. Together, these shifts highlight how investors are placing a premium not only on market stability but also on the size and scale of the U.S. market, favoring jurisdictions that offer both security and significant growth opportunities in an era of heightened geopolitical risk. Increased protectionist policies, heightened international tensions, and national security concerns in key industries that could compromise national interests are driving this shift.

Conclusion

In Part 2, we’ll turn to another powerful influence on global dealmaking—the expanding reach of regulatory and national security oversight. We’ll also look at how companies are responding, from restructuring deal terms to implementing new risk-mitigation strategies, as they adapt to a more complex and closely monitored environment.