Whether the changing mood music on the M&A regulatory environment creates a chilling effect or not, dealmakers are already adapting. Diligence for larger companies is focusing on questions of divestitures and lengthy reviews, says Accenture global M&A lead J. Neely. And cross border antipathy between national security regulators in the U.S. and China is already creating opportunities for lucrative take-privates. “It feels like saber rattling, but could put a chill on that activity,” Neely says. “The conversation we have is to try to figure out how to navigate it, not a reason not to transact.”

The market appears to be pricing in some elevated risk of antitrust scrutiny of deals. A frenetic M&A pace has overwhelmed oversight body the Federal Trade Commission to the extent that it’s warned companies the expiration of the standard 30-day waiting period is no longer an implicit approval of a deal. That creates a threat of enforcement even after deals have closed. President Biden’s executive order last year has spurred the Department of Justice and Federal Trade Commission to increase scrutiny of deals, but there’s more fury than storm in the declaration. Actually intensifying competition review standards would require acts of Congress and/or litigation.

That means predictions that the M&A wave’s megamergers are behind us may be a bit pitched. Dealmakers are coping with perceived risks by preparing buyers to assess divestiture risks from the outset rather than scrapping even larger mergers. “If you go in eyes wide open about where there might be real questions, you have to be really prepared that if you have to do major divests, that might be required,” Neely explains.

On the cross-border front, geopolitical tensions with China is actually creating lucrative opportunities for private equity firms. Global chair of Morrison & Foerster’s private equity group Marcia Ellis says the biggest beneficiaries of regulatory demands that China-headquartered companies delist in the U.S. is PE: buyout funds can realize an immediate return taking such firms private since many trade at a premium when re-listed in Hong Kong or on mainland exchanges.

So much for a cooling effect. Much like rising interest rates, inflation, and Covid, heightened antitrust risk appears another risk unable to abate the blazing merger climate.

Brandon Zero