Navigating the evolving M&A landscape in 2025

Continued turmoil in the macro climate is creating uncertainty for M&A, but some uplifts are showing as well.

From a high of $4.1 trillion in deal value in 2021, the market saw a dip to $2.1 trillion in 2023, with a modest rebound projected for 2024. Influenced by economic policies across major economies, this recovery is expected to continue. Global conditions are shifting, with the US and EU easing economic policies and China stimulating its economy, potentially providing a more favorable backdrop for M&A.

However, regional conflicts with escalation risks add a layer of uncertainty and regulatory complexity remains a significant challenge. Numerous anti-trust cases are in progress, which could affect M&A outcomes. Nationalistic policies continue to pose difficulties for cross-border deals, particularly in high-tech and steel sectors. While there is expectation of a relaxing of regulatory scrutiny under the Trump administration beginning in January, how this plays out remains to be seen, and there is no expectation of major changes in Europe. These regulatory hurdles require dealmakers to be prepared to navigate a complex legal landscape—often necessitating strategic adjustments to ensure compliance and successful deal closures.

Combined, these aspects will continue to fuel uncertainty but also compel companies to adopt a cautious investment stance—prioritizing stability over ambitious expansion if decisions can’t be made with a high degree of confidence.

Looking beyond these overarching macro uncertainties, there exists a significant pent-up demand among both corporate acquirers as well as PE firms.

This demand is set to catalyze a resurgence in M&A activities when market conditions stabilize. With companies having navigated through complex times, restructuring efforts are expected to lead to a new wave of growth, with M&A naturally rising to the top of corporate agendas. The availability of cheaper stimulation capital, due to a shift in monetary policy toward loosening interest rates, is expected to provide the necessary financial oxygen for buyouts and other investment activities.

For PE firms, hold times for portfolio companies are relatively long at an average of 6+ years, while dry powder, having grown 23% to $1.2 trillion, is at an all-time high. Both these metrics indicate a readiness to capitalize on new opportunities. All the while, activist investors are likely to continue their focus on identifying advantaged owners and advocating for strategic divestitures or acquisitions that maximize shareholder value. Nearly a third of large public companies face a 60%+ probability of being targeted in the near term.

Combined, these trends are expected to invigorate the M&A landscape, as companies look to enhance their competitive positions and are placing growth and revenue generation back at the top of their corporate agendas.

In the digital age, technology is a cornerstone in the M&A process, offering tools that enhance decision-making and execution.

Technology can help identify additional opportunities for economic benefit, strengthen value creation theses and enable rapid execution to achieve those benefits. Generative AI in particular is showing great potential, with 64% of M&A executives believing that it will revolutionize deal processes.

However, leadership remains equally important, particularly in areas like cultural integration and people management, which are critical for the success of M&A deals. While technology can aid in identifying patterns and potential issues, the leadership aspect is vital for ensuring successful integration and maintaining the talent within acquired companies. A balanced approach that leverages both technology and strong leadership is essential for deal success.