The European Union is undertaking its first major overhaul of merger and acquisition (M&A) policy in two decades, driven by a recognition that the global geopolitical and trade context has shifted, making "industrial scale and global competitiveness increasingly important." This move aims to facilitate the creation of larger local firms that can better compete with their American and Chinese counterparts. The new guidelines, currently under public consultation and expected to be finalized by the end of 2026, will give more weight to factors like scale, innovation, investment, and resilience as pro-competitive elements that can benefit from consolidation.
This policy shift comes amidst concerns about Europe's ability to retain its technological and economic value. A study conducted by Swedish private equity group EQT AB and McKinsey & Co. revealed that European technology companies with a combined value of €1.2 trillion (approximately $1.4 trillion) have either debuted on overseas exchanges or been acquired by foreign buyers over the past decade. This "tech exodus" highlights the need for a stronger domestic ecosystem capable of fostering and retaining large, competitive firms.
Previously, M&A transactions valued at an aggregate of at least €70 billion were prohibited by the European Commission, and many others were withdrawn due to regulatory hurdles. This led to a significant amount of potential deal activity being suppressed. The new framework is expected to unlock more than €10 billion in annual deal value that was previously held back by regulatory uncertainty. Experts, like Jens Kengelbach of BCG, believe the reform is a critical moment for European industrial strategy, as it acknowledges that scale itself can be pro-competitive, enabling larger European players to have a stronger cost base and greater capacity to invest, thus better competing globally and driving innovation. Eurogroup President Kyriakos Pierrakakis also emphasized the need for "European rather than national champions" and more cross-border M&As, particularly in sectors like banking.
The need for reform is particularly visible in strategically important industries such as telecommunications, energy, steel, defense, and industrial supply chains, where fragmentation has persisted while global competitors have consolidated. A January 2026 BCG European Competitiveness Barometer showed that 95% of business leaders believe Europe must protect its commercial interests more assertively, and almost two-thirds of both business leaders and citizens desire more European integration. The increased transatlantic M&A activity, which saw a rise of over 140% to roughly $165 billion in cross-border M&A between the US and Europe in the first quarter of the year, further underscores the dynamic M&A landscape Europe is navigating. Companies are advised to proactively prepare for these changes by building deal capability, developing strategic rationales for potential transactions, and constructing evidence-based efficiency arguments.
Former European Central Bank president Mario Draghi's landmark report in September 2024 also highlighted Europe's competitiveness challenges, calling for structural reforms. The proposed changes aim to reverse the trend of Europe's tech exodus and enable the creation of "global champions" by reconsidering transactions that were previously deemed too risky under the old framework. Companies are encouraged to revisit their M&A opportunities with fresh eyes, assessing which combinations the proposed framework might now accommodate.
