Five M&A Trends To Watch In 2025

The future looks bright indeed for dealmakers. As we edge closer to 2025, the mergers and acquisitions (M&A) landscape is poised for a significant transformation, with mid-market deals expected to dominate. This shift is fueled by lower interest rates, reduced inflation and a new U.S. administration, sparking optimism among dealmakers. According to our Quarterly Deal Performance Monitor, run with Bayes Business School, there’s been a noticeable uptick in deals exceeding $1 billion over the past 12 months, instilling confidence across corporate boardrooms.

5 M&A Trends for 2025

After a challenging couple of years marked by inflation and rising interest rates, M&A activity in 2024 demonstrated signs of recovery. However, getting complex, costly transactions right in the fast-changing world of M&A will remain challenging for buyers and sellers. Companies should keep an eye on these five trends:

1. Consolidation and rise of mid-market deals

Due to a shortage of high-quality M&A targets during 2024, companies are now sitting on a record cash pile that must be directed somewhere. With deal flow predicted to increase during the next 12 months, investment will be focused on core revenue-generating functions that enhance competitive edge, with divestment of non-core assets. With a top-heavy market during the third quarter of 2024, mid-market M&A activity looks set to surge in 2025, driven by increased margin pressure, the push for scale and a focus on inorganic growth to accelerate digital transformation. Under pressure to deploy vast sums of capital, private equity buyers will also see this upswing in carve-outs and spin-offs as an opportunity to generate value.

2. AI’s watershed moment

Digital transformation and the emerging use of AI in the deal process will be a big story in 2025. Technology-driven dealmaking is being advanced by companies seeking to integrate AI capabilities — including automation, cloud computing and cybersecurity—to remain competitive in a digital-first world. With technology already affecting every deal, the next question is whether 2025 will be a watershed moment for generative AI when the fog of hype clears and its true value is revealed, including its potential as a powerful new tool for streamlining the resource-intensive M&A process, from target identification to due diligence and integration.

3. Economic stabilization

Improving economic conditions and market sentiment should give much-needed predictability for buyers to plan their financing, especially for mid-sized companies reliant on borrowing, and a more stable foundation for more deal activity. Strong equity markets should also be a key driver of M&A, usually corresponding with a positive economic outlook and high CEO confidence.

4. Geopolitical knowns and unknowns

2024 was the year of the ballot box, with more than 50 elections worldwide. Despite less political instability anticipated in the short term, geopolitics will inevitably continue to  influence the global M&A landscape.

Companies will need to be ready for the risks of rapid changes in regional and global stability, particularly conflicts in the Middle East and Ukraine. The impact of the U.S. and China’s trade relationship on the cost of doing business could create further complexities that dealmakers will need to navigate carefully during the year ahead.

5. Regulatory evolution

Dealmakers will be energized by the prospect of reduced regulation, but also cautious as they adopt a wait-and-see approach regarding which policies the incoming administration enacts. More highly regulated sectors, including finance and pharmaceuticals, where antitrust oversight could loosen, will likely see a lift in M&A activity.

As we look ahead to 2025, the M&A landscape is poised for opportunities. The surge in mid-market deals, driven by the need for scale and digital transformation, will likely reshape industries, fostering greater consolidation and efficiency. Integrating AI into the deal process holds the promise of streamlining and enhancing every stage, from target identification to integration. Economic stabilization and strong equity markets should provide a more predictable environment for dealmakers, boosting confidence and activity. However, the ongoing geopolitical uncertainties and the regulatory landscape’s evolving nature will require dealmakers to take a nimble and adaptive approach.

The excitement about consolidations and acquisitions should not overshadow what lies at the foundation of every deal: employees. To be truly ready for the next transaction, companies must understand and prepare for people and culture integration risks and opportunities. Companies that can navigate these challenges will be better positioned to ensure a smooth transition for their workforce and to capitalize on the opportunities that 2025 presents.

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