Political developments are moving from the periphery to the centre of merger and acquisition (M&A) decision‑making, industry reporting and academic research say. Geopolitical tensions, trade disputes and tighter scrutiny of foreign investment are changing how deals are valued, structured and regulated, with measurable effects on returns and projected synergies.
Dealmakers add political risk to due diligence
Financier Worldwide reported that acquirers and advisers now routinely assess election risk, sanctions exposure and potential policy shifts alongside legal, financial and operational reviews. The report cites pressures including expanded use of tariffs by the United States administration, sustained conflict in the Middle East, and the ongoing war in Ukraine as examples of disruptions that have a tangible effect on cross‑border transactions.
A study by the M&A Research Centre at Bayes Business School, part of City, University of London, quantified part of that effect. It found that when targets had significant exposure to political uncertainty, completed acquisitions delivered lower returns and smaller synergies compared with less exposed deals.
| Metric | Impact where political exposure was high |
|---|---|
| Deal returns | 1% lower |
| Deal synergies | 3% lower |
Those figures, while modest in isolation, translate into material value differences on large transactions and help explain why bidders are becoming more selective about targets and more conservative in their valuation assumptions.
Regulatory complexity and geopolitical intelligence
Financier Worldwide highlighted another trend: governments in the US, UK and European Union are increasing scrutiny of foreign investment in strategic sectors. That greater regulatory complexity — from sanctions lists to national security reviews and trade controls — is prompting bidders to build geopolitical resilience into integration planning.
- Broader due diligence: Teams now include geopolitical risk assessments alongside legal and financial reviews.
- Target selection: Acquirers favour targets with lower exposure to sanctions, trade chokepoints or abrupt policy shifts.
- Valuation adjustments: Forecasts and synergy estimates are trimmed where political uncertainty is significant.
Dealmakers are also paying for specialised geopolitical intelligence during the diligence phase. That intelligence focuses on likely policy paths, sanctions risk and exposure to contested shipping routes such as the Strait of Hormuz — elements that can alter supply chains and market access overnight.
What this means for South Africa
Though the report and study focus on global markets, the implications are immediate for South African corporates and investors that operate internationally or seek foreign capital. Greater scrutiny in major markets can raise the cost of outbound investment and make local firms less attractive as acquisition targets if they are exposed to sanctioned trade routes or politically sensitive sectors.
On the flip side, the shift to factor political risk explicitly into deals creates opportunities for advisers, compliance specialists and geopolitical intelligence providers. It also places a premium on transparent governance and robust risk management at South African firms that want access to cross‑border capital.
As governments continue to use trade and industrial policy as instruments of economic strategy, the report underscores a simple political economy rule: those who benefit from cross‑border deals will pay more attention to politics, and those who pay for mitigation are likely to pass those costs on to shareholders and consumers.
For policymakers, the message is clear. If South Africa wants to attract stable investment and smooth cross‑border transactions, clarity in policy, engagement with international partners and predictable regulatory frameworks matter as much as competitive wages or tax incentives.
