Cross-border mergers and acquisitions (M&A) are typically driven by strategics’ specific competitive needs and a combination of attractive targets and financing for private equity acquirors. Looking forward to 2026, however, it appears that much broader macro factors are likely to have an impact on cross-border M&A activity.

The world is in the process of adapting to several disruptive megatrends that are occurring simultaneously. International trade is shifting away from its focus on globalization that has been dominant since the 1980s. Western governments are gradually viewing critical mineral supplies as a national security issue. The energy transition toward renewables continues (albeit in an evolving form). Generative artificial intelligence and other advanced technologies are driving a global digital infrastructure arms race. Underlying all of these developments are long-term global demographic changes that are already affecting the markets in which many companies seek to grow.

When combined with post-COVID-19 inflation and high interest rates, M&A decision-makers have a lot to digest, whether they are strategics or sponsors. The first half of 2025 saw a significant slowdown as dealmakers took stock of all these factors. However, it seems that in the second half of 2025 dealmakers began to gain clarity on where they believe these trends will land in the medium and long term. As a result, in 2026, we anticipate an acceleration in both domestic and cross-border transactional activity as large companies begin to move even quicker to shift their operations to reflect this new economic cycle, giving sponsors the opportunity to acquire attractive assets as they adjust to the increased cost of capital.

Several disruptive megatrends are reshaping the landscape for cross-border M&A.

Expect more corporate carve-outs

The most obvious outcome will be a rise in corporate carve-outs. Anecdotally, we are already seeing this trend at play, but we expect to see a surge. That said, we would not be surprised to see more complex transaction structures than the traditional carve-out in which the strategic fully exits a business. As increased cost of capital puts pressure on private returns, we are seeing a growing number of transactions in which corporate sellers are expected to retain some participation in the business following a sale to a sponsor, be that through seller financing arrangements or material rollovers that strategics have customarily avoided.

State capital reshapes market dynamics

Another trend that may impact M&A activity in 2026 is the growing involvement of the United States and other Western governments in transactions aimed at strengthening national security. We are seeing an increased investment of state capital in private companies that support economic or industrial goals, such as securing access to or production of critical minerals or energy supplies.

For instance, the US and Australia recently signed a deal to extend financial support to several Australian companies with mining and processing projects that will shore up both countries’ access to critical minerals. Each country will invest at least $1 billion over the next six months as the US works to secure access to the minerals needed to power domestic manufacturing, national security, and other strategic industries.

This kind of investment is not a new or particularly partisan phenomenon – its roots can be traced back in the US to the lead in to World War II – but it has the potential for unpredictable impacts on where and how public and private nonstate capital gets deployed, both now and when governments seek to monetize these investments. As geopolitical undercurrents continue to push governments to encourage certain assets into national ownership, there may be opportunities for private funds to deploy capital into those deals.

Reconfiguring global supply chains

Although the seismic shifts in global trade policies that have come to a head in 2025 continue to occur, it seems dealmakers are beginning to understand what this new era of global trade will ultimately look like. We have started to see several deals motivated by a drive toward localized manufacturing. Many companies are working to shorten cross-border supply chains and bring manufacturing closer to end consumers, whether on a national level or within regional trade blocks. For instance, many energy companies are acquiring manufacturing assets in, or otherwise shifting production to, the Middle East to service regional customers (and doing the same in other parts of the world), regardless of where the business is headquartered.

Additionally, there is a desire among multinational companies to develop close relationships and bring local partners into overseas markets where they might historically have sought to grow organically. That is in part a recognition of a broader want among customers to work with local counterparties and it often results in joint venture transactions or tie-ups with equity partners that can bring local operational knowledge.

Conclusion

Even though there is much change to navigate, we do not anticipate any slowdown in deal activity in 2026. Rather, we expect the most forward-thinking companies to reposition themselves for the next economic cycle, resulting in more opportunities for both strategic acquirors and sponsors.

We look forward to a busy year of large-scale M&A action ahead, as some long-predicted fundamental shifts materialize and start to boost deal momentum.