In today’s market, regulatory uncertainty is no longer a background risk in mergers and acquisitions. It is a central factor shaping how transactions are negotiated, structured and completed. Across the UK, Europe, the United States, and the Middle East, shifting policies on competition law, foreign direct investment, ESG compliance, tax reform and sector-specific regulation are materially influencing deal design.

 

At Churchill Mergers, we are seeing first-hand how buyers, sellers and investors are adapting their approach to mitigate risk while preserving value.

“Regulation has become one of the most significant value drivers in any transaction. The structure of a deal is now often designed around regulatory clarity rather than simply price,”
— Jamal Khan, CEO, Churchill Mergers

 

Why Regulatory Uncertainty Is Increasing in M&A

Several macro factors are contributing to this environment:

• Enhanced scrutiny from competition authorities
• Stricter foreign investment controls
• Evolving ESG reporting requirements
• Sector-specific oversight (healthcare, fintech, aerospace, pharmaceuticals)
• Changes to tax frameworks and cross-border compliance

For mid-market businesses — particularly those with turnover between £5 million and £250 million — regulatory risk can directly impact valuation, timing and completion certainty.

As a global M&A advisory firm with offices in London, Miami and Dubai, Churchill Mergers advises clients operating across multiple jurisdictions. Regulatory inconsistency between regions is now a routine consideration in cross-border transactions.

 

1. The Rise of Earn-Out Structures

One of the most visible responses to regulatory uncertainty in M&A is the increased use of earn-out structures.

Where regulatory approvals or compliance outcomes are uncertain, buyers are reluctant to pay full value upfront. Instead, consideration is increasingly structured as:

• Initial payment at completion
• Deferred payments linked to performance
• Milestone-based regulatory triggers

 

In regulated sectors such as financial services or healthcare, part of the purchase price may depend on licence transfers, compliance confirmations or client retention following approval.

 

“Earn-outs are no longer purely performance-driven. We are now seeing regulatory milestones embedded directly into consideration mechanics,”
— Jamal Khan, CEO, Churchill Mergers

 

This approach protects buyers while allowing sellers to achieve full value if regulatory hurdles are cleared.

 

2. Deferred Consideration and Staggered Closings

 

In environments where regulatory approvals may delay completion, deals are increasingly structured with:

• Staggered closing dates
• Conditional completion mechanisms
• Deferred consideration arrangements

Rather than a single completion event, transactions may now include:

1. Signing
2. Regulatory approval period
3. Conditional closing
4. Final settlement

This structure enhances flexibility while maintaining transaction momentum.

 

3. Increased Conditionality in Heads of Terms

Regulatory risk is now addressed much earlier in the transaction lifecycle.

Where previously Heads of Terms might focus primarily on valuation and structure, they now often include:

• Specific regulatory approval conditions
• Defined long-stop dates
• Break clauses linked to regulatory refusal
• Allocation of compliance costs

Churchill Mergers’ structured documentation ensures clarity around what constitutes a “Transaction” and how completion is treated .

Clear drafting reduces ambiguity where regulatory outcomes alter deal pathways.

 

4. Reverse Break Fees and Risk Allocation

Another emerging trend is the use of reverse break fees, particularly in competitive processes.

If a buyer fails to secure regulatory approval despite reasonable efforts, sellers increasingly seek financial protection. Conversely, buyers may require protection if sellers withdraw following regulatory delays.

“The allocation of regulatory risk has become a negotiation in its own right. It is no longer assumed that one party absorbs it entirely,”
— Jamal Khan, CEO, Churchill Mergers

This balanced approach improves transaction certainty.

 

5. Regulatory Due Diligence Is Now Front-Loaded

Due diligence has become more detailed and increasingly regulatory-focused.

Buyers now conduct:

• Compliance audits
• Licence and regulatory mapping
• Historical enforcement reviews
• ESG exposure assessments
• Data protection and cyber compliance checks

Confidentiality protections are therefore critical at early stages. Strong NDAs safeguard sensitive disclosures .

Early regulatory diligence reduces post-completion disputes and protects both parties.

 

6. Alternative Structures: Minority Investments and Staged Acquisitions

Where full acquisition approvals are uncertain, parties may instead pursue:

• Minority stake investments
• Structured equity participation
• Joint ventures
• Convertible instruments
• Call and put option mechanisms

This enables capital deployment while regulatory clarity is achieved.

 

7. Sector-Specific Regulatory Impact

Regulatory uncertainty does not affect all industries equally.

At Churchill Mergers, we advise on transactions across:

• Healthcare
• Financial services and fintech
• Aerospace and manufacturing
• B2B SaaS
• Professional services

In wealth management or healthcare, licensing transfers and regulatory approvals are central to deal viability. In professional services, risk may relate more to tax reform and employment legislation.

Understanding sector nuance is critical to successful deal structuring.

 

8. Impact on Valuation Multiples

Regulatory uncertainty can compress headline multiples where:

• Approval timelines are unpredictable
• Political scrutiny is heightened
• Cross-border investment is sensitive

However, intelligent structuring can preserve overall deal value.

 

“The headline multiple may adjust, but with careful structuring — earn-outs, deferred consideration and staged equity — sellers can still achieve strong overall outcomes,”
— Jamal Khan, CEO, Churchill Mergers

 

Structure has become as important as price.

 

9. Cross-Border Complexity

For businesses operating across the UK, EU, United States and UAE, layered regulation creates additional challenges, including:

• Divergent competition frameworks
• Data localisation laws
• Export controls
• Sanctions regimes

An experienced M&A advisory team must anticipate these risks at the outset.

 

Conclusion: Deal Structure Is Now a Strategic Lever

Regulatory uncertainty is not reducing transaction activity. Instead, it is reshaping how transactions are structured.

Deals are now:

• More conditional
• More staged
• More milestone-driven
• More documentation-heavy
• More risk-allocated

 

“The market has not become more difficult — it has become more sophisticated. Deal structure is now a strategic tool for managing regulatory risk while unlocking value,”
— Jamal Khan, CEO, Churchill Mergers

 

For business owners considering a sale, investment, or strategic partnership, understanding how regulatory frameworks impact deal structure is essential.

 

Connect With Churchill Mergers

For further insights on mid-market M&A, regulatory trends and corporate finance strategy:

 

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