The Strait of Hormuz and Its Implications for Cross-Border Acquisitions

14 Min Read By: Zeynep Sener Today

In Brief

Gulf-based port operators are increasingly pursuing geographic diversification as part of their long-term investment strategy. Geopolitical risk is rarely identified as the principal driver, but several acquisitions and investments indicate an emphasis on expanding beyond traditional regional trade corridors.
In addition to traditional infrastructure valuations and due diligence, strategic buyers may assess an acquisition through the broader lens of portfolio resilience and strategic objectives of reducing geographic concentration risk.
Traditionally, regulatory M&A analysis focused primarily on the identity of the investor and competition law considerations. Increasingly, regulators also examine the nature of the target itself, such as whether the asset performs critical supply chain, logistics, or public functions.
Geopolitical uncertainty may influence the manner in which transactions are structured. Parties may favor phased investments, joint ventures, minority investments, or staged capital commitments that preserve strategic flexibility while facilitating expansion into new jurisdictions.

Cross-border infrastructure acquisitions have traditionally been driven by commercial expansion, operational efficiencies, and financial return; infrastructure assets have long attracted strategic investors because of their relatively stable cash flows, inflation-linked revenues, long concession periods, and portfolio diversification benefits. Nevertheless, global infrastructure mergers and acquisitions (“M&A”) activity slowed during 2025. Excluding the proposed acquisition of Hutchison Ports, global infrastructure deal value declined from approximately US$28 billion in 2024 to US$22 billion in 2025, while the number of completed transactions fell from fifty-one to forty.^[1] Although financing conditions and broader macroeconomic uncertainty contributed to this decline, investor appetite for strategically significant infrastructure assets has remained resilient.

Within the infrastructure sector, ports occupy a distinctive position. They are no longer viewed merely as transportation assets but increasingly as critical infrastructure connecting global supply chains, logistics networks, industrial development, and national security interests. The disruptions experienced in recent years—including the COVID-19 pandemic, the Red Sea crisis, and renewed tensions surrounding the Strait of Hormuz—have further highlighted the strategic importance of geographically diversified port networks.

This article argues that the recent geopolitical developments suggest that strategic resilience is becoming an increasingly important investment consideration, particularly when you look at the instability surrounding the Strait of Hormuz. These kinds of developments are influencing not only where operators based in the Persian Gulf (“Gulf”) invest but also how cross-border acquisitions are evaluated, structured, and negotiated. While the legal framework governing M&A transactions remains fundamentally unchanged, geopolitical considerations appear to be playing an increasingly prominent role throughout the transaction life cycle, influencing valuation, due diligence, transaction structuring, and contractual risk allocation.

Why Strategic Infrastructure Is Different from Other Assets

When M&A involves infrastructure, it does not fundamentally alter the legal mechanics of an acquisition. Share purchase agreements (“SPAs”), due diligence, valuation methodologies, and transaction structuring remain the core tools of every cross-border transaction. However, the nature of the underlying asset significantly influences how those tools are applied. In this respect, acquisitions involving strategic infrastructure—and ports in particular—differ from acquisitions of ordinary commercial businesses.

Unlike many corporate assets, ports perform a dual function. They are commercial enterprises generating revenue for their owners, but they also constitute critical infrastructure supporting international trade, supply chains, energy security, and, in some jurisdictions, national security. Their operation is therefore closely connected with public policy objectives and is frequently governed by concession agreements, public-private partnership frameworks, or sector-specific regulatory regimes.

This means that the acquisition of a port is rarely assessed solely through the lens of projected cash flows or expected operational synergies. Because governments and regulators increasingly view ports as assets whose ownership may affect broader public interests, foreign investment approvals, sector-specific regulation, and ongoing governmental oversight often assume greater significance than in transactions involving nonstrategic assets.

The strategic nature of ports also influences how buyers evaluate value creation. While conventional valuation techniques remain unchanged, the commercial attractiveness of a port may extend beyond its standalone financial performance. Its geographic location, connectivity to global logistics networks, access to alternative trade corridors, and contribution to a diversified infrastructure portfolio may all enhance its strategic value. In this sense, a port may represent not merely an operating business but a long-term strategic position within an investor’s broader network.

The United States provides a useful illustration of how national security considerations have increasingly influenced the regulatory framework governing foreign acquisitions of strategic infrastructure. Although the Committee on Foreign Investment in the United States (“CFIUS”) has long reviewed foreign acquisitions presenting national security concerns, its jurisdiction was expanded under the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”) to cover certain noncontrolling investments in U.S. businesses involved in critical infrastructure, critical technologies, and sensitive personal data.^[2] This expansion reflects the growing recognition that national security concerns may arise not only from the acquisition of control over strategic assets but also from certain minority investments and associated governance rights.

The political sensitivity of port acquisitions was evident well before FIRRMA, however. In 2006, Dubai Ports World’s proposed acquisition of the U.S. port operations of British firm P&O generated substantial congressional opposition and public debate over national security, notwithstanding the transaction’s prior review by CFIUS.^[3] The controversy illustrates that acquisitions of strategically important infrastructure may face political and national security considerations extending beyond conventional competition law analysis.

Investment Strategies’ Evolution

The first question an investment committee asks is not “How should the SPA be drafted?” but rather, “Why are we acquiring this port?” The answer to that question has evolved significantly over time. In the early 2000s, the response would most likely have focused on increased container throughput, higher revenues, greater EBITDA, economies of scale, and market expansion. In short, the primary objective was growth. Port acquisitions were fundamentally about generating greater financial returns.

A decade later, the investment rationale became more sophisticated. Port operators increasingly evolved into integrated logistics providers, expanding beyond terminals into inland depots, rail connections, warehouses, logistics parks, and other value-added services. The strategic objective was no longer simply to own ports, but to control larger segments of the supply chain and create integrated logistics platforms.

Today, however, investment committees ask different questions. What happens if a major trade corridor is disrupted? What if sanctions affect a key market? Is the existing portfolio overly concentrated in one region? How resilient is the operator’s global network? Growth remains important, but resilience has become an equally significant investment objective. The legal mechanics of the acquisition have not fundamentally changed; the commercial rationale has.

For transactional lawyers, this evolution is significant. We continue to negotiate the same legal documents—SPAs, shareholder agreements, and transaction documents—but we do so in support of a different business strategy. Transactional lawyers are not merely document drafters. They must understand why their client or company is acquiring a particular asset because that commercial objective inevitably influences the priorities of the transaction. A client acquiring a port to strengthen network resilience will not necessarily negotiate different legal concepts, but it may place considerably greater emphasis on governance rights, concession stability, expansion opportunities, and long-term regulatory certainty than a buyer motivated solely by short-term financial returns. The role of the transactional lawyer is therefore no longer limited to documenting the acquisition. It increasingly requires an understanding of the commercial, regulatory, and geopolitical considerations that shape the investment itself. In strategic infrastructure transactions, legal execution and business strategy are no longer separate disciplines—they are increasingly intertwined.

The Gulf’s Outbound Diversification Strategy

Recent transaction activity suggests that Gulf-based port operators are increasingly pursuing geographic diversification as part of their long-term investment strategy. Although few transactions expressly identify geopolitical risk as their principal driver, several acquisitions and investments indicate an emphasis on expanding beyond traditional regional trade corridors. Examples include DP World’s reported interest in acquiring a stake in Associated British Ports in the United Kingdom,^[4] DP World’s continued investments in Senegal and India,^[5] and AD Ports Group’s acquisition of MBS Logistics.^[6] More recently, DP World also announced plans to develop a port and logistics hub in Fujairah on the United Arab Emirates’ east coast.^[7] While the project serves multiple commercial objectives, its location outside the Strait of Hormuz also illustrates the growing strategic importance of geographic diversification and supply-chain resilience in infrastructure investment decisions.

Rather than viewing these transactions in isolation, they may be understood as part of a broader effort to strengthen portfolio resilience. For operators with significant exposure to trade routes affected by geopolitical tensions, investments in geographically diverse jurisdictions may reduce concentration risk while expanding access to new markets and supply chains. In this respect, transaction activity itself may provide a more meaningful indicator of evolving investment priorities than public statements accompanying individual acquisitions.

Implications for M&A Practice

Valuation

Traditional infrastructure valuations continue to focus primarily on projected cash flows, concession durations, growth prospects, and the regulatory environment in which the target operates. However, strategic buyers may increasingly assess an acquisition through the broader lens of portfolio resilience. For a Gulf-based port operator whose existing assets are concentrated within a particular maritime corridor, acquiring a port in another jurisdiction may generate strategic value beyond the target’s stand-alone financial performance.

The strategic importance of ports is also evolving beyond their traditional role as stand-alone maritime assets. This broader strategic perspective may also influence valuation. While established valuation methodologies such as discounted cash flow and comparable transactions remain unchanged, acquirers may attribute additional strategic value to assets that strengthen portfolio resilience, expand logistics connectivity, or provide access to alternative trade corridors. Consequently, a target’s contribution to an integrated logistics network may justify a strategic premium beyond its stand-alone operating performance. Thus, geopolitical diversification as well as an integrated logistics network may influence strategic premium that a particular buyer is willing to pay because the acquisition contributes to a more balanced portfolio and reduces concentration risk.

Beyond the Traditional Due Diligence

Legal due diligence traditionally focuses on the target’s assets, contracts, permits, litigation, regulatory compliance, and liabilities. Acquisitions motivated by strategic diversification, however, may require an additional layer of commercial analysis.

The relevant question is no longer confined to whether the target represents a legally and commercially attractive investment. Acquirers may also consider whether the transaction achieves its broader strategic objective of reducing geographic concentration risk and enhancing network resilience. Due diligence therefore extends beyond identifying legal risks within the target itself to evaluating how the acquisition complements the acquirer’s existing portfolio.

Foreign Investment Screening

An increasingly important consideration in cross-border infrastructure M&A is the expansion of foreign direct investment (“FDI”) screening regimes. This is actually a direct consequence of geopolitics. Traditionally, M&A analysis focused primarily on the identity of the investor and competition law considerations. Increasingly, however, regulators also examine the nature of the target itself. Infrastructure assets performing critical supply chain, logistics, or public functions—including ports—may attract enhanced regulatory scrutiny regardless of whether the acquirer is considered a low-risk investor.

This development has important implications for transaction execution. Regulatory approvals under FDI regimes must be factored into transaction timetables, conditions precedent, and long-stop dates, and parties may also negotiate the allocation of regulatory risk if approvals are delayed, conditioned, or refused. The commercial agreement remains central, but the SPA must also address the allocation of regulatory and national security risk, particularly where the target operates critical infrastructure.

Aligning Governance with Strategic Objectives

From a transactional lawyer’s perspective, we can say that strategy determines structure. This becomes especially crucial where a project is developed and operated with multiple partners. Mechanisms such as reserved matters, board composition, business plan approvals, capital commitments, and exit provisions have always been integral components of shareholder agreements and joint venture arrangements. However, where the strategic objective extends beyond financial returns to include portfolio resilience and long-term network diversification, greater emphasis may be placed on governance rights that facilitate those objectives.

For example, investors may seek stronger protections to ensure that strategically important expansion projects—such as the construction of additional berths, logistics parks, inland terminals, or rail connections—cannot be blocked by a joint venture partner. Similarly, shareholders may negotiate mandatory capital contribution obligations, agreed capital expenditure programs, or other funding mechanisms to ensure that future expansion cannot be frustrated by a shareholder’s refusal to finance the business. Business plans may incorporate long-term diversification projects, logistics integration, and capacity expansion as strategic priorities rather than purely operational objectives. Deadlock mechanisms may also have greater importance where disagreements over expansion or strategic investment could undermine the long-term purpose of the acquisition. Likewise, parties may attach greater significance to reserved matters relating to the disposal of strategic land, amendments to concession agreements, changes to the business model, or the surrender of concession rights. The legal tools themselves remain familiar; what changes is the strategic purpose they are intended to serve.

Transaction Structuring and Risk Allocation

Geopolitical uncertainty may also influence the manner in which transactions themselves are initially structured. Rather than pursuing immediate full acquisitions, parties may favor phased investments, joint ventures, minority investments, or staged capital commitments that preserve strategic flexibility while facilitating expansion into new jurisdictions.

An emerging structural response is the pairing of port operators with sovereign co-investors, whether their own state’s fund or another Gulf Cooperation Council (“GCC”) sovereign wealth fund, rather than operators pursuing acquisitions on a stand-alone basis. This model—operator as strategic and operational lead, sovereign wealth fund as capital partner—allows portfolio diversification to be pursued without concentrating balance-sheet risk in any single jurisdiction, while also potentially easing the path through target-state FDI screening, given the increasing scrutiny that sovereign-controlled acquirers face in certain jurisdictions. It further reflects a broader shift already visible across the region, where GCC sovereign wealth funds increasingly negotiate co-investment rights and direct deal access rather than passive allocations.

Approaches to outbound capital deployment vary across GCC port operators. Some pursue acquisitions primarily through internally generated cash flows, prioritizing balance-sheet control and execution speed, while others increasingly structure transactions alongside sovereign co-investors to share capital exposure and broaden deal capacity. Neither approach is inherently superior; the choice reflects the country’s preference and priorities, as well as each operator’s balance-sheet strength, risk appetite, and strategic priorities at a given point in its growth trajectory.

Similarly, established contractual protections may receive greater scrutiny during negotiations. Material adverse change (“MAC”) clauses provide a useful example. In acquisitions of existing port operators, where the target company already holds the relevant concession, parties may negotiate whether the commercial consequences of future geopolitical developments—such as sanctions, disruption of key trade routes, significant increases in operating costs, or other material adverse effects on the target’s business—should fall within the agreed definition of a MAC or instead remain with the buyer as part of ordinary market risk. The significance of this negotiation extends beyond a traditional no-MAC condition to closing. Where geopolitical risks are addressed through representations and warranties, the agreed allocation of risk may also have implications during the post-closing indemnity period, subject to the agreed survival periods and the indemnification regime under the SPA. More broadly, sanctions-related representations, interim period covenants, and conditions precedent may also be tailored to reflect the increased importance of geopolitical considerations. The evolution lies not in the creation of new legal concepts, but in the increasing significance attached to existing mechanisms for allocating commercial risk.

Conclusion

Whether current geopolitical tensions persist or gradually ease, recent developments demonstrate that geographic diversification has become an increasingly important strategic consideration in infrastructure acquisitions. Buyers may therefore evaluate potential targets not only on the basis of their stand-alone financial performance but also on the extent to which an acquisition enhances the resilience and geographic balance of their wider portfolio.

As geopolitical considerations become more deeply embedded in investment decision-making and structuring the deal, they are also likely to receive greater attention throughout the transaction process. Valuation, due diligence, transaction structuring, and contractual risk allocation may increasingly reflect various objectives extending beyond the target itself.

For M&A practitioners, the challenge is no longer confined to executing transactions efficiently. It also involves advising clients and companies on how geopolitical developments influence investment strategy and the legal execution of cross-border acquisitions. In this respect, port M&A activity offers a compelling illustration of the growing intersection of infrastructure investment, geopolitics, and corporate law. It demonstrates that the legal toolkit available to M&A lawyers has not fundamentally changed: What has changed is the commercial environment in which that toolkit operates.