M&A Amid Cumulative Shocks Since 2020: From Linear Globalization to Strategic Fragmentation

Since 2020, the global M&A market has ceased to be driven by fluid global integration and has instead been shaped by a succession of geopolitical and health shocks that have fundamentally altered investor decision-making.

The Covid-19 crisis first triggered a sudden disruption of value chains. It exposed the risks of excessive dependence on concentrated production hubs, particularly in China, and accelerated a partial relocation and diversification dynamic, often described as “China + 1.” This trend did not fade with the reopening of the global economy; on the contrary, it became more structured.

The war in Ukraine then reinforced the geopolitical dimension of investment decisions. It reintroduced sovereign risk into Europe and accelerated the fragmentation of energy and industrial systems. In this new environment, companies have had to integrate strategic resilience into transaction analysis, sometimes at the expense of purely financial optimization.

Persistent tensions in the Middle East, especially around Iran, have added another layer of uncertainty to energy prices and global logistics flows. As a result, cash flow projections have become more volatile, leading to more cautious valuations.

In this context, protectionist trade policies, particularly the tariffs associated with Donald Trump, act as an additional driver of fragmentation. Tariffs and technology restrictions are creating durable barriers to global arbitrage and pushing companies toward more regionalized strategies.

Direct Impact on M&A Transactions: From Globalization to Regionalization

Recent data points to a profound transformation in the structure of M&A activity. Intra-regional transactions are increasing, while complex cross-border deals are becoming more difficult, riskier, and therefore less frequent.

In an increasingly unstable environment, companies are prioritizing acquisitions that are geographically, culturally, legally, and politically closer to home. According to recent analyses, nearly 80% of global transactions now remain intra-regional, highlighting a partial retreat from financial globalization.

At the same time, the market is becoming more polarized. Mega-deals led by large corporations with strong balance sheets continue to dominate, whereas mid-sized transactions are more heavily affected by volatile financing conditions and regulatory uncertainty.

This shift is critical: capital flows are not disappearing, but becoming more concentrated and geographically reoriented.

China: From Global Center of Gravity to Strategic Risk

For more than two decades, China stood at the center of global value chains and represented a major destination for industrial M&A. That position is now being reassessed.

Rising Sino-American tensions, combined with technological restrictions and reciprocal sanctions, have created a new reality in which China remains industrially indispensable yet politically sensitive. Global dependence on China is not vanishing, but it is progressively being reorganized through alternative models such as “China+1” and “China+ASEAN.”

As a result, investment flows are increasingly shifting toward Southeast Asia, India, and Mexico across several industrial sectors. Companies aim to preserve Asia’s cost advantages and manufacturing capabilities while reducing geopolitical exposure.

This trend does not imply the deindustrialization of China. Rather, it reflects a gradual but structurally significant redirection of new M&A investments away from China toward more diversified regional platforms.

Asia Excluding China: The Main Beneficiary of Capital Reallocation

Asia excluding China is emerging as the principal beneficiary of the reallocation of industrial and financial flows.

ASEAN countries, India, and advanced economies such as Japan and South Korea are increasingly attracting acquisitions designed to secure alternative production capacities, particularly in semiconductors, batteries, and electronics.

Recent figures show a strong increase in both intra-Asian investment flows and inbound investments from Europe and the United States. This evolution is driven less by pure cost optimization than by a growing need for resilience and supply-chain security.

At the same time, Asian corporations are expanding abroad more aggressively to secure market access and strategic assets, accelerating outbound M&A activity across the region.

Latin America: The Strategic Return of a Previously Peripheral Region

Latin America, long considered peripheral to global M&A strategies, is regaining strategic importance.

Three main factors explain this renewed attractiveness:

1. American Nearshoring
   U.S. companies are seeking to relocate parts of their supply chains closer to home, particularly in Mexico and Brazil.
2. Access to Critical Resources
   The region possesses key assets essential to the energy transition, including lithium, copper, agricultural resources, and energy infrastructure.
3. Geopolitical Diversification
   Latin America is perceived as relatively less exposed to direct Sino-American tensions.

In this context, M&A activity in the region is becoming less speculative and increasingly strategic, with a stronger focus on infrastructure, energy, natural resources, and agribusiness.

The United States: Structural Opportunity or Political Risk?

The United States now occupies a uniquely ambivalent position in global M&A strategy.

On one hand, it remains the world’s deepest and most dynamic M&A market. Strong growth prospects, high market liquidity, and leadership in technology—particularly in AI and digital industries—continue to make the U.S. an indispensable investment destination. Recent trends indicate that the Americas account for more than half of global transaction value.

On the other hand, protectionist trade policies, polarized electoral cycles, and regulatory uncertainty have introduced a growing degree of political volatility. Tariffs, restrictions targeting China, and policy shifts associated with administrations such as Trump’s have already demonstrated their capacity to disrupt global deal flows and delay transactions.

This creates a structural dilemma for investors:

• The United States remains essential for growth and technological exposure.
• Yet it is increasingly perceived as a developed market where short-term political risk has become more significant.

As a consequence, investors are adopting more differentiated exposure strategies: maintaining a strong U.S. presence while simultaneously increasing geographic diversification.

A New M&A Landscape: Toward a Multipolar World

The accumulation of recent crises—health, military, energy, and trade-related—has accelerated the transition from a highly globalized economy toward a more fragmented and multipolar world.

This new landscape can be summarized as follows:

• Less reliance on China as the sole global hub
• Greater diversification across Asia (ASEAN, India, Japan, South Korea)
• Rising strategic importance of Latin America
• The United States as both a growth engine and a political risk factor
• Europe occupying a more cautious, regulated, and intermediate position

In this environment, companies are no longer pursuing economic efficiency alone. Increasingly, they are seeking a balance between cost optimization, market access, and geopolitical resilience.

A new era for the M&A market based on strategic positioning and geographic diversification

Successive crises—pandemic-related, geopolitical, energy-driven, and commercial—have fundamentally reshaped the logic of M&A transactions by introducing a new dominant variable: structural geopolitical risk.

This transformation is not necessarily reducing global M&A volumes, but it is profoundly changing their geographic distribution. China is gradually losing its status as the singular center of capital allocation in favor of a broader and more diversified Asian landscape. Latin America is gaining strategic relevance, while the United States remains indispensable yet increasingly politically complex.

The M&A market is therefore entering a new era in which strategic positioning takes precedence over pure optimization, and geographic diversification is no longer optional, but essential to long-term resilience.

By: Thierry Gibert