Cross-Border M&A 2025: Looking Back and Looking Ahead

Introduction

As 2024 ended and 2025 began, many analysts and practitioners anticipated a resurgence in mergers and acquisitions (M&A), including cross-border M&A. Although the year did not start with an M&A redux, there are reasons for optimism. 

This chapter provides deal makers, other deal participants and stakeholders, as well as their advisers, a high-level view of selected considerations to help inform their strategies for successfully steering cross-border M&A deals through signing and closing. 

Political Conditions

Looking back at 2024

In 2024, cross-border M&A activity was curtailed by political and geopolitical turbulence, including international armed conflicts. Major national elections were held around the world – each preceded by a period of anticipation about the results (which, in the United States, historically has often led to a slowdown in M&A activity) and followed by a period of transition. Political and geopolitical conditions created an environment of uncertainty for domestic M&A within the applicable jurisdictions and for cross-border M&A involving those jurisdictions.

Looking ahead in 2025

Currently, geopolitical instability remains elevated. Geopolitical challenges will likely persist as a general deterrent on cross-border M&A. However, these challenges are not new, and the M&A market is resilient and for the most part has been evolving to account for the resulting uncertainties. 

Certain US industries will continue to be the subject of nationally politicised debates. Potential non-US buyers should be aware of the industries that are the target of heightened scrutiny and consider how to tailor their strategies for pursuing related investments (and how to rationalise their strategies in deal-related communications). 

Economic and Trade Conditions

Looking back at 2024

Macroeconomic factors provided a blend of favourable and unfavourable conditions for the overall environment for M&A activity, including cross-border M&A, in 2024. Consecutive years of robust performance of the US and non-US equity markets, coupled with an easing stance in global monetary policies by central banks in both developed and emerging economies, promised to encourage M&A deal making. At the same time, higher interest rates remained and inflation persisted, presenting challenges.

Looking ahead in 2025

Although it remains to be seen how quickly equity market valuations will stabilise and return to growth, interest will rates drop or inflation will cool, the confluence of these factors, in even small increments, will help stimulate M&A activity, including cross-border transactions. A stabilisation in the equity markets will increase confidence levels and enhance equity’s attraction as acquisition currency. A decline in interest rates will lower the cost of leverage, which can enable more debt financing-dependent sponsors and corporate buyers to pursue M&A activity. Additionally, declining or stabilising interest rates may tempt financial sponsors to call and deploy committed capital – a scenario for which deal makers have been patiently preparing. 

The unpredictability surrounding the imposition of tariffs from the United States, including the levels at which and the timing for when they are enacted, and the volatility in potential responses by other jurisdictions, represent a moving target. Deal makers may want to consider a different strategy for businesses with a non-US footprint versus businesses with a US footprint. For example, for companies with a global supply chain or operations outside the United States that expect tariffs to substantially impact profitability, a restructuring of the affected portions of the supply chain into the United States, a more complete transformation of the supply chain or a divestiture may become sound options. This area should become part of any buyer’s due diligence.

Regulatory Conditions

Looking back at 2024

M&A deals in 2024 faced heightened scrutiny by antitrust/competition enforcers in the United States and other key jurisdictions around the world. Deals were also impacted by an expanded scope of review by US regulators in relation to non-US investment in the United States involving critical technologies, infrastructure and sensitive personal data. These factors, seen as creating a “merger tax” due to longer regulatory review processes and higher associated costs, impacted the overall M&A deal climate.

Looking ahead in 2025

US antitrust/competition

Some analysts and practitioners continue to expect that in 2025 the US presidential administration’s agenda – which has repeatedly announced that boosting domestic production and business growth will be a national priority – will adopt a more traditional approach to US antitrust/competition regulatory enforcement in comparison to the last four years. This includes a willingness to consider remedies to resolve otherwise problematic transactions. This could lead deal makers and other deal participants to reconsider M&A agendas that previously stalled.

US national security

Deal makers and other deal participants should expect that the Committee on Foreign Investment in the United States (CFIUS) will continue to scrutinise acquisitions by non-US buyers of US target companies in industries considered to be strategic to US national interests. Also, the much anticipated “reverse CFIUS” went into effect in early January 2025, authorising CFIUS to review, in certain jurisdictions, investments by US businesses outside the United States for potential national securities issues.

Sector-Specific Conditions

Healthcare and life sciences, technology, and energy and infrastructure were among the sectors that drove US M&A activity in 2024. These and certain other sectors are likely to continue being influenced, directly or indirectly, by shifts in the other M&A deal-making conditions. Deal makers and other deal participants should continue to pay attention to these industries in the balance of 2025.

Healthcare and life sciences

Companies in the healthcare and life sciences sector are seeking to remain competitive and accelerate growth through strategic acquisitions. Themes from previous years, including portfolio consolidations via selling non-core business units and production sites, may also continue.

Technology (including AI), cloud services and cybersecurity

Companies in the technology sector have been showing strength in M&A activity involving AI, cloud services and cybersecurity, among other areas, including those that are adjacent to AI technologies, such as data centres, energy sources and other supporting infrastructure.

Energy and infrastructure

The energy and infrastructure sector is expected to experience continued high levels of M&A activity. This will be driven in part by an anticipated reduction in US regulatory oversight and the overall increased demand against the backdrop of a promised US pro-growth agenda.

Practical Takeaways

Building on lessons learned in 2024 and considering the state of the global market in Q1 of 2025, although by no means an exhaustive list, here are a few key takeaways for deal makers.

Exploration of alternative transaction structures

Deal makers should consider whether majority or minority investments, joint ventures and other transaction alternatives to M&A may be suitable options for cross-border activity – in particular, when significant capital and operational expertise are required – to derisk regulatory scrutiny or to limit economic exposure to specific industries or investments.

Use of pricing mechanics to bridge valuation gaps

Deal makers can continue to rely on measures like post-closing earnouts and contingent value rights to narrow valuation gaps and reduce pressure on returns expectations.

Allocation of regulatory risk

Deal makers should “front-load” the regulatory analysis and be realistic when evaluating and addressing the time and the costs of, and likely regulatory scrutiny involved in, the merger/competition and foreign investment review processes. They should consider how these factors could affect the regulatory covenants and any associated termination fees that are triggered upon the termination of a definitive transaction agreement due to a regulatory condition failure, as well as the length of the “long-stop date”. Advanced planning builds confidence and reduces tension in risk-allocation negotiations that can expose the parties to adverse outcomes if not narrowly tailored.

Conclusion

Cross-border M&A in 2025 presents both opportunities and challenges. Navigating the political landscape, leveraging more favourable economic and trade conditions and hedging against those less favourable, and making practical preparations against the evolving regulatory climate are key to successful cross-border M&A strategies in the remainder of the year.