Regulatory realities amid the M&A market’s momentum

The rebound in M&A activity

In this paper, we’ll provide an overview of momentum in M&A markets and, against that backdrop, describe the unique regulatory risks and political pressures that color the current boom in M&A activity. We’ll also discuss five practical guidelines companies can consider to manage the political and regulatory risks that prevail in the markets.

M&A Markets state of affairs

In a period of brisk M&A activity, it is not unusual to experience regulatory obstacles and political pressure aimed at preserving competition and consumer interest. But in the current circumstances of economic and societal disruption, these forces are prompting a more stringent regulatory agenda and a heightened sense of economic patriotism.

The resulting scrutiny of trade, social, and environmental issues may also affect the ability to effectively complete a deal; as a result, dealmakers may need to take these factors into account and plan their M&A strategy differently than they might have in past cycles.

The rebound in M&A markets

The rebound in M&A markets has been nothing short of dramatic. Market conditions have remained highly favorable for M&A activity, companies were able to raise significant amounts of debt at historically low rates, and many were sitting on record levels of cash reserves.

As a result, many pursued defensive transactions, seeking to safeguard core markets, while others played offense with deals meant to accelerate a transformation. Certainly, in the United States, there is the added motivation to complete deals before potential changes to tax law come to prevail.

New regulatory and political hurdles

Recovery from the pandemic has increased concerns around national self-reliance, food security, and supply chain dependencies, and the impact of climate change. These issues have started to manifest themselves in regulatory concerns around M&A activity, and circumstances that might challenge a deal are becoming more prevalent.

The path forward

Companies that expect to pursue M&A activity need to be alert to the implications of potential regulatory intervention, political opposition, and even consumer or activist involvement.

Deloitte suggests the following five guidelines that companies can consider when planning for and mitigating the associated risks.

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