As we look back on a year marked by an unusually high number of elections — about 64 across the globe — there’s an undeniable shift in the political dynamic that is reverberating across markets. While elections themselves are often seen as democratic milestones, the political outcomes have more than just social implications.
They are becoming increasingly fundamental in shaping the direction of global merger & acquisition (M&A) activity. The intersection of political change and M&A has long been recognised, but in 2024 the trends seem more pronounced, driven by economic uncertainty, regulatory shifts and investor sentiment.
Political shifts in mature markets, such as Europe or the US, have an outsize affect on M&A flows. In the US, for instance, presidential elections often bring about significant changes in tax policies, antitrust regulations and trade arrangements such as the African Growth & Opportunity Act, all of which can alter the attractiveness of certain sectors or regions for M&A. As seen with the re-election of Donald Trump on an “America First” platform, shifts in political leadership can lead to increased scrutiny of big mergers, particularly in sectors where competition is a key concern.
Political uncertainty can act as a double-edged sword for M&A markets. On the one hand, elections signal potential regulatory changes, new policies and shifts in government priorities — factors that businesses must weigh carefully when planning large-scale acquisitions or mergers. On the other hand, political instability can lead to nervousness among investors, creating an environment of caution or even paralysis.
A prime example of this comes from Mauritius. The recent election there saw a shift in power, with former prime minister Navinchandra Ramgoolam returning to office. While the Mauritian economy is booming, the election outcome has caused a ripple effect in financial markets, with the rupee dipping in value against the dollar.
Ramgoolam’s pledges to cut taxes on necessities, reduce fuel and food prices and increase social spending have led to uncertainty in the business community. They will require funding, which could mean either new fiscal policies or cuts in other areas. Such uncertainties can delay or deter M&A activity as companies may hesitate to make major investment decisions in a market undergoing political overhaul.
This pattern isn’t unique to Mauritius. Across Africa similar political shifts have prompted caution in M&A markets. In SA, notwithstanding a smooth transition of power, the new political landscape has raised questions about the future of economic reforms, governance and policy continuity. For businesses eyeing opportunities in SA, this shift could signal the need for a reassessment of risk.
In Mozambique, where the opposition claims electoral fraud and international observers have highlighted irregularities, the political fallout has created a sense of instability. Potential M&A transactions in Mozambique may be held up as businesses await clarification on the political and regulatory environment post-election. M&A deals often rely on predictability and in a climate of contested political outcomes dealmakers may be more hesitant to engage in high-risk investments.
In contrast, in countries such as Botswana, where power shifted smoothly in an election after almost six decades of the same governing party, the change can act as a catalyst for M&A activity. A smooth transition reassures investors that the country is committed to upholding democratic processes and maintaining a stable regulatory environment. In such instances, M&A deals can continue with confidence, as the political stability signals a continuity of economic policies that businesses can work within.
A key element to consider in the context of political shifts is the broader economic environment. Elections and the political decisions that follow often influence national economic policies — monetary policy, trade tariffs or fiscal spending — that can have a direct affect on industries and markets. For example, an incoming government may decide to ease foreign investment restrictions, potentially opening up new opportunities for cross-border M&A. Conversely, a government — potentially including the US — that implements nationalistic policies, could stifle foreign M&A activity by making it more difficult for foreign companies to operate within the country.
This trend is particularly important in emerging markets, where political decisions can either open up new frontiers or close doors to international capital. Elections in countries such as Indonesia, India and Brazil can alter the flow of cross-border M&A activity based on the level of openness to foreign investment and changes in economic policy. In countries where political decision-making is unpredictable or heavily influenced by populist agendas, M&A dealmakers may choose to hold back or seek alternative opportunities in markets with more political stability
The key takeaway is that political change is no longer a background factor but a central one in deal-making strategies. From SA to Mauritius, Europe to the Americas, the affect of political decisions on M&A is clear: political stability, or the lack thereof, is a major driver of investment choices. As more nations experience political shifts, the M&A landscape will continue to evolve, with businesses keenly aware that what happens in the voting booth today could have profound consequences for their strategies tomorrow.
In an increasingly interconnected world the rise of political uncertainty is prompting a rethinking of how M&A deals are structured, negotiated and executed. In 2024 political decisions are not just shaping elections — they are reshaping the global M&A landscape itself.
• Bahlmann is CEO at Deal Leaders International.
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