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It's been a bad week for SoftBank and its CEO, Masayoshi Son.

Not only is the firm's COO, Marcelo Claure, leaving after a reported pay dispute, but portfolio company Nvidia is set to abandon its planned purchase of British chip designer Arm, denying SoftBank what could've been a $40 billion exit.

The Arm deal has been beset by hurdles all along. Just over a year after the transaction was first announced, Europe's competition watchdog launched an in-depth investigation into the matter. Then, in Washington, the Federal Trade Commission sued to block the deal on the grounds that control of Arm's chip designs would allow US-based Nvidia to monopolize the market. And a month later, the UK government chimed in by launching its own competition probe.

Nowadays such obstacles may seem par for the course for deals of this size, but Nvidia's predicament comes at a time when regulators are out to make big takeovers even harder, especially in tech. The question is what impact this will have, not just on overall M&A deals, but on exit activity. Even if the prospect of tighter rules doesn't deter dealmakers, at the very least, closing deals could become more costly and time-consuming.

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As it stands, the backdrop for broader merger activity is positive. Total deal value in 2021 rose to a record of nearly $5 trillion, according to PitchBook's 2021 Global M&A Report, partly driven by pent-up demand from the economic uncertainty of 2020. Last year's volume included 6,453 tech deals worth a combined $896.5 billion, a 50% year-over-year leap.

That momentum may carry over into 2022, but the threat of increased regulatory scrutiny casts a long shadow, especially in the context of antitrust and national security policy. Tech giants, in particular, are in regulators' crosshairs—none more so than the big five: Alphabet, Amazon, Apple, Meta (formerly Facebook) and Microsoft.

Already, the FTC and Department of Justice have called on the public for input on revamped rules that would broaden antitrust enforcement powers.

Meanwhile, from London to Brussels, European government watchdogs are erecting barriers that will challenge a wide variety of tech mergers. The EU is finalizing the Digital Markets Act, a raft of reforms aimed at curbing the influence of big tech companies. One measure in the law would compel tech companies to notify the EU of all mergers, regardless of size, alerting regulators in local jurisdictions to deals they otherwise might not have examined.

In the UK, where the government has already been consulting on giving watchdogs greater control over mergers, a new national security regime has come into force requiring mergers across 17 sensitive sectors to get pre-approval from the government. Among them are tech verticals such as robotics, AI, communications, computer hardware, cryptography, data infrastructure, space tech and quantum tech.

There is an argument to be made that the push for more scrutiny will be difficult to enforce, casting doubt on whether it will meaningfully impact M&A activity. Even so—as is the case with Nvidia and Arm—most big tech transactions involve companies that have global operations and as such will come under the jurisdiction of more than one regulator.

Another recent deal that could test regulators is Microsoft's $68.7 billion agreement to acquire game developer Activision Blizzard. While the acquisition isn't under official investigation, there's an expectation that it may yet attract competition scrutiny because Microsoft's Xbox console could get exclusivity on a vast library of game titles under the Activision Blizzard umbrella.

The prospect of greater regulatory oversight will go beyond simply curtailing M&A deal volume. It will have an impact on exits, too. For SoftBank, this isn't just a hypothetical point. The Japanese tech giant, which bought Arm for $32 billion back in 2016, was hoping to offload the company as part of a broader effort to sell off assets.

With one path to liquidity closed, SoftBank is now reportedly stepping up plans to take Arm public. However, with tech stock performance being less than impressive so far this year, that could take a while.

This article originally appeared on PitchBook News