Tech M&A and investment: Legal and regulatory complexity shaping investment flows and driving innovative deal structuring

The global technology investment landscape has entered an era where regulatory complexity is no longer peripheral – it is central to how deals are structured, valued and executed. As private capital continues to flow into tech – across venture capital, private equity, and institutional investment – the legal and regulatory environment is shaping not only how and where deals are done, but which technologies are prioritised, and what risks investors must manage. 

Tech M&A a priority for investors and corporates

Heading into 2026, fast-paced developments in AI, easing interest rates and stronger equity markets are unlocking capital for the high growth tech sector, reigniting tech M&A activity. Deal value has rebounded strongly with tech leading all sectors, with approximately $809 billion worth of transactions completed as of Q3 2025, accounting 24% of global M&A volume.

Mega-deals are surging globally, reflecting a shift toward fewer, larger, and more strategic transactions. Private equity and venture capital firms are also deploying record dry powder globally targeting areas that promise scalability and resilience such as AI, cybersecurity, and digital infrastructure [read more]. Acqui-hires, minority stakes, and bolt-on acquisitions are increasingly used by corporates to access talent, and IP. 

Improved investor sentiment and a backlog of IPO-ready firms are fuelling a cautious rebound in tech listings. The U.S. remains dominant, while Hong Kong and the Middle East emerge as alternative hubs. UK listing reforms aim to attract founder-led and early-stage tech firms, with recent tech IPOs signalling renewed confidence. SPACs are also resurging, offering flexible routes to public markets under more disciplined regulatory frameworks. 

Strong corporate balance sheets, and a strategic push to “buy rather than build” will continue to fuel tech M&A. Cross-border deals are accelerating under intensifying competition as companies seek supply chain resilience, talent diversification, and strategic technologies.

Geopolitics and national security

Geopolitical tensions, especially the challenging relationship between the U.S. and China, is reshaping tech investment which has become increasingly global. Foreign direct investment (FDI) regulations have been tightened in different parts of the world to protect nascent technologies from being acquired by foreign buyers. This signals a fundamental shift: national security is now a core investment consideration in deal evaluation.

Specifically, the U.S. has strengthened its FDI regulations and introduced mandatory filings, with a specific focus on the technology industry. In Europe, France has issued updated guidelines which extend the scope of its FDI regime’s application – including by updating the list of critical technologies – and the UK is currently consulting on the inclusion of semiconductors and critical minerals as standalone sectors. The EU is also in the process of reforming its FDI Screening Regulation to strengthen protections around national security and critical technologies, with adoption of the reforms expected in Q1 2026. Subsequently, we expect a wave of reforms across most EU Member States, shaping European foreign investment regimes for the remainder of this decade.

The U.S. Treasury’s outbound investment security program, effective January 2025, imposes new prohibitions, diligence and notification requirements for outbound investments directly or indirectly supporting certain activities by entities in or controlled from China in sensitive sectors like AI and semiconductors, microelectronics and quantum technology. In parallel, the EU launched a Recommendation in January 2025 encouraging Member States to review the extent and scope of its outbound investments into non-EU countries in three high risk and strategically important areas (advanced semiconductors, AI and quantum technologies). Member States have been asked to report on their implementation of the Recommendation and any risks identified by June 2026. 

Fragmented global regulation – and the compliance premium

Antitrust enforcement is also central to tech M&A, with merger control in global tech transactions becoming more complex. Regulators are reassessing impacts on innovation, data concentration, and platform dominance. In the U.S., structural remedies like divestitures and behavioral commitments are back in favor to preserve competition, and may include novel commitments to advice policy goals. Dealmakers must be proactive in addressing antitrust risks, structuring deals to withstand scrutiny, and planning for potential regulatory delays. Read more

With the cyber-threat landscape increasing, governments are also focusing on cybersecurity for critical infrastructure. While the current U.S. administration has signaled a pro-growth deregulatory stance, cybersecurity regulation has still tightened at the state level and within key federal frameworks. In 2026, we expect to see further developments in cyber-specific regulation in the U.S. and EU and UK.

Tightening digital regulation, led by the EU particularly impacts consumer platforms where additional compliance concerns are focused on data privacy and online safety in digital services. Cross-border transactions now require deeper due diligence on regulatory exposure, particularly in regions with divergent approaches to AI accountability and cybersecurity standards. 

Strong governance boosts valuations and attracts institutional capital, making legal foresight a strategic asset. Investors apply a “compliance premium” or discount based on a company’s governance and risk posture. Growth-stage firms must invest in compliance infrastructure – often hiring dedicated officers and building audit systems – adding cost and extending funding timelines.

Legal complexity driving innovative deal structuring

As tech companies stay private longer, investors are deploying creative mechanisms to manage risk through funding rounds. Venture capital deals now routinely include liquidation preferences for valuation downside protection, anti-dilution safeguards in the event of down rounds, and regulatory contingencies such as compliance milestones requirements before product release or expansion and indemnification provisions for regulatory breaches.

The legal landscape is also reshaping tech exits. Heightened scrutiny of data-rich and dominant platforms has led to longer reviews and higher rejection risks. Alternative exit models – such as employee tender offers and continuation funds – are gaining traction. Given that cross-border exits face added hurdles under national security regimes, especially in AI and semiconductors, early regulatory engagement is essential to manage jurisdictional risks. 

Hybrid IPO models – partial listings with secondary placements – are emerging to balance liquidity and regulatory exposure. Voluntary self-disclosure policies offer pragmatic tools for managing post-acquisition risk, such as the DOJ’s M&A Safe Harbor, which provides a clear framework shielding acquiring companies from criminal liability for misconduct at the target – provided they act quickly and transparently. Minority investments, joint ventures, and licensing arrangements are emerging as alternatives to full acquisitions, particularly in sensitive sectors.

Legal foresight a strategic enabler

As fragmented regulatory regimes and heightened scrutiny become central to risk assessment, investors and corporates are adapting with innovative deal models that balance commercial goals with compliance demands. Investment flows are redirected toward jurisdictions and sectors with clearer, more predictable regulatory environments – or where compliance can be leveraged as a competitive advantage. 

In tech M&A and funding, regulatory posture now affects valuation, deal timelines, and exit strategies, making legal foresight a strategic enabler of cross-border growth and resilience. Legal teams are at the forefront of this shift – not just mitigating risk, but actively shaping strategy, structuring transactions, and unlocking value in a landscape where legal, technological, and operational considerations converge.

“AI, fintech, and digital infrastructure are driving renewed momentum in mega-deals and sector consolidation. An increasingly complex and fragmented regulatory landscape necessitates early, innovative engagement and thoughtful structuring, particularly as governmental authorities respond to geopolitical pressures and data-driven risks. Companies able to align legal, strategic, and technological capabilities will be best positioned to unlock value in 2026.” 

George Casey, Global Chairman of Corporate, Chairman of the Americas, New York