Government regulations impact M&A strategies

With an acceleration of technological advancements and critical issues such as climate change, government regulations have emerged which will directly impact businesses and M&A activity. While some may slow dealmaking, other regulatory changes present M&A opportunities.

Antitrust scrutiny is increasing, with the US Department of Justice and Federal Trade Commission (FTC) publishing their ‘2023 Merger Guidelines’ in December. Mergers combining firms of more than 30% market share are presumptively illegal. This shift was evident in a string of notable cases including the FTC’s antitrust lawsuit against Amazon, set for trial in 2026. The EU has also implemented new guidance along with various national antitrust laws introduced by member states.

New regulations, however, can have a positive impact on M&A activity in certain sectors. Cybersecurity is an integral focus as cyber threats surge, and laws surrounding data protection, privacy, and AI seem ever-changing. While companies may struggle to keep up with increased legalities, cybersecurity providers can capitalise on growing demand from potential clients and buyers.

ESG regulations are also top of mind as both governments and consumers put pressure on corporations. The EU has led such efforts with the newly introduced ‘Corporate Sustainability Due Diligence Directive’ which outlines reporting requirements for large enterprises. Additionally, many firms have publicised ambitious net zero targets. This creates M&A opportunities for innovative companies enabling the energy transition to be acquired by larger players focused on hitting their ESG targets. For example, net zero targets are propelling the traditional real estate industry towards greater sustainability. Specialised consultancies and project management companies can therefore support real estate owners and developers through renewable energy guidance and solutions to comply with green mandates.

Changing government regulations across a variety of industries will prove onerous for some companies and advantageous for others. It is important for businesses to consider not only the current regulatory landscape but also anticipate any future changes while planning their business and M&A strategies. 

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