Geopolitical M&A

Will today’s geopolitical trends outlast the current U.S. administration, compelling corporates to overhaul strategies, or will it prove transient, rendering adaptive actions counterproductive? Could America’s ‘sovereigntism’ spread globally, or will it instead spark counter-movements in other regions?

Considering voter distrust of globalization and intensifying great-power rivalry, it is reasonable to assume that sociopolitical undercurrents will continue to foster economic nationalism beyond this decade. If this proves right, a few M&A themes will surface:

• Regional Champions: Domestic or regional consolidation will prevail as a safe form of M&A with tangible synergies as policymakers support 'regional champions' across strategic sectors by easing antitrust regulations. A focus on regional consolidation will also be strengthened by mounting political friction in cross-regional transactions;

  
  

• Vertical Integration: Supply chain derisking (incl. access to raw materials) will spur vertical integration via intraregional M&A ‘upstream’ in strategic or fast-growing industry segments;

  
  

• Geographic Diversification: Economic decoupling will enhance geographic diversification benefits, though diverging regulations and cultural norms may increasingly hinder cross-regional synergies. In a multipolar world where it is strategically, operationally, and financially important to be European in Europe, American in the US, Chinese in China, etc., reporting by geography will gain relevance;

  
  

• Neutral Markets: Firms will pursue acquisitions in politically neutral hubs (e.g., Southeast Asia, Gulf states) to seek to maintain indirect access to ‘rival’ bloc markets;

  
  

• South-South M&A: Emerging-market firms will acquire or merge with peers in developing economies, reducing reliance on developed markets while gaining diversification (and scale);

  
  

• Corporate Split by Geography: Should a regional decoupling eventually lead to wide economic, political, and financial divergences, a firm’s market valuation could be dragged down by the least attractive region. Company splits along geographic lines could unlock value;

  
  

• Business Simplification: Rising complexity costs from a multipolar world will require portfolio simplification through divestitures, thereby facilitating the emergence of regional champions;

  
  

• Dual-Use Technology: Acquiring technologies with dual applications will become a priority for industrial and defense companies, as they aim to control advanced technologies and benefit from dual manufacturing flexibility. Deals in this space will be subject to intense regulatory scrutiny.

  
  

While economic nationalism dominates the zeitgeist, history cautions against overcorrection. Many anticipated permanent changes during the COVID crisis have proved less dramatic than expected. The essence of strategic foresight lies in distinguishing enduring trends from transient disruptions.

That said, the strategic value of leadership on a region-by-region basis – versus purely global strategies – will only intensify. Opportunities to consolidate activities in core industry segments regionally cannot be missed since they preserve optionality – enabling firms to adapt from a position of strength as geopolitical dynamics evolve.