M&A Annual Report: Is the Wave Finally Arriving?
Powerful factors are driving a resurgence in mergers and acquisitions (M&A), particularly in North America, yet dealmakers must still navigate considerable challenges.
The global M&A landscape did not achieve the robust recovery that many anticipated in 2024. While performance improved—significantly in some regions—various pressures tempered global dealmaking, yielding moderate returns. Deal value increased by 12 percent to $3.4 trillion. Although some challenges have faded while new ones have emerged, the hurdles remain substantial. However, strong tailwinds are also at play, suggesting that a significant shift could occur, leading to improved, or even sharply increased, M&A returns in 2025.
At first glance, it may seem difficult to remain optimistic after years of expecting a full recovery. However, many of the factors that constrained dealmaking over the past three years—some of which limited 2024’s global deal value and volume to near the 20-year average—are now receding. If this pattern continues, M&A markets could experience a major shift in the next six to twelve months, particularly as the year progresses.
Could new geopolitical, trade, or policy obstacles challenge this outlook? Certainly—like an unexpected frost harming early growth. However, historical patterns suggest that economic logic should ultimately prevail.
Not all dealmakers will benefit equally. Market forces will impact regions, sectors, and subsectors differently. Companies that proactively adapt their M&A strategies to these changing conditions are most likely to thrive. As M&A markets become more fragmented, dealmakers will fall into two categories: those who emerge as major winners and those who struggle to keep pace. In addition to benefiting from certain geographic or sector-specific advantages, the most successful dealmakers will have a well-defined strategy, a clear understanding of the interplay between transactions and organic growth, and the necessary internal capabilities to execute deals effectively across all stages—from sourcing and due diligence to synergy realization and portfolio optimization.
The Case for Optimism
Despite a complex landscape filled with opposing forces that complicate decision-making, several compelling factors support a positive—perhaps even bullish—M&A outlook for 2025.
First, macroeconomic conditions are more favorable than in recent years. Globally, economies have demonstrated resilience. The anticipated global recession never materialized, employment rates have remained strong, capital costs have declined as restrictive monetary policies eased, and valuations are stabilizing. In the United States, a surging stock market saw the S&P 500 rise by 23 percent last year, with 57 record-high closes, reinforcing investor confidence. The U.S. market alone now accounts for over 60 percent of global stock market capitalization.
Additionally, corporate balance sheets remain strong. Companies have accumulated substantial cash reserves, with some estimates suggesting that non-financial firms are holding approximately $7.5 trillion in cash. Pent-up demand is also fueling M&A interest. Many firms that focused on organic growth during the COVID-19 pandemic are now seeking new expansion opportunities, with strategic and structural incentives to engage in dealmaking.
For example, industries such as banking, life sciences, oil and gas, technology, and advanced manufacturing need to adjust their portfolios to capture innovations and capabilities essential for future growth. Meanwhile, in other sectors, businesses are leveraging M&A to build leadership positions that will enable them to compete more effectively in evolving markets. Across industries, the most successful dealmakers adopt a programmatic M&A approach—executing multiple small- or mid-sized acquisitions each year as part of their overall growth strategy. This approach consistently outperforms peers and delivers a median annual excess total shareholder return (TSR) of 2.3 percent. Furthermore, divesting non-core assets remains the least risky and most effective M&A strategy.
Political transitions following elections in several major economies are also expected to influence regulatory frameworks, impacting multiple industries. In the United States, recent rulings on the energy sector that favored green technologies may be reversed in favor of fossil fuels. Financial regulations related to capital requirements, consumer protections, and anti-money-laundering rules may also be relaxed. In Europe, a shift in political dynamics has led to plans to overhaul three major sustainability regulations, which have long been a source of business concerns. Meanwhile, scrutiny of the technology sector is increasing, with potential regulatory shifts affecting business operations across regions.
Geopolitical shifts are also altering business strategies. For example, as Western companies seek to mitigate supply chain risks, India is increasingly seen as a rising competitor to China. These changes provide strong incentives for businesses to reassess their strategies and investments, making M&A a crucial tool for adapting to evolving requirements.
The Special Role of Private Equity
One of the most significant drivers of M&A growth in 2025 could be private equity (PE). Historically, financial investors have played a critical role in fueling M&A activity, and they now have strong incentives to re-enter the market. Global dry powder (unallocated capital in PE funds) has reached extraordinary levels, exceeding $2 trillion. Meanwhile, long-delayed exits are pushing investors to realize returns, with average holding periods for exits reaching an all-time high of 8.5 years in 2024—more than double the 4.1-year average in 2007.
Although sponsor-led M&A activity is beginning to recover, it remains well below 2021’s peak levels, suggesting room for further growth. In the Americas, PE firms contributed $398 billion to M&A volume in 2024, representing 22 percent of all activity—down from $865 billion (28 percent) in 2021. Similar trends were observed in Europe, the Middle East, and Africa (EMEA), where PE’s share of M&A volume in 2024 stood at $243 billion (29 percent), down from $483 billion (32 percent) in 2021. In the Asia-Pacific (APAC) region, PE activity totaled $126 billion (16 percent), compared to $279 billion (21 percent) in 2021.
Moreover, the growth of the private investment industry itself could further drive M&A activity. In the United States, private fund assets grew 34 percent between 2020 and 2023, reaching $28 trillion—nearly matching public mutual fund and exchange-traded fund holdings. Over the same period, the number of private funds increased by nearly 60 percent, reaching over 100,000. This rapid expansion creates additional momentum for dealmaking.
Challenges Remain
Despite these positive trends, significant challenges persist for 2025. Many of the largest obstacles to M&A activity are not purely economic or strategic but are shaped by policy decisions, geopolitical instability, and regulatory changes.
A recent survey of nearly 1,000 executives across 86 nations identified geopolitical instability as the top risk to domestic economic growth, with concerns about trade policies ranking a close second. Trade, once considered a stabilizing factor, is now seen as a major potential disruptor, particularly in North America, APAC, and Europe. The risk of tariffs and protectionist policies could complicate deal valuations and decision-making.
Regulatory scrutiny is another potential headwind. While APAC and EMEA regulatory changes are not expected to significantly hinder M&A activity, new U.S. regulatory requirements will increase disclosure obligations, adding up to 121 hours of additional preparation time for complex deals. These changes are designed to enhance antitrust enforcement, requiring companies to provide more extensive information upfront. Even if regulatory environments become more accommodating in the future, unwinding existing procedural rules could take time.
Looking Ahead
Regardless of market conditions in 2025, companies that have honed their M&A capabilities over time will continue to succeed. The most effective dealmakers are those who refine their strategies at each stage of the deal cycle.
With approximately $3.4 trillion flowing through M&A markets in 2024, investing in M&A expertise remains a logical move. Each transaction should be more effective than the last, and best practices should evolve as companies gain experience.
To thrive in this environment, companies should:
- Reduce exposure to global risks by reassessing supply chains and diversifying investments.
- Leverage AI to enhance deal sourcing, due diligence, and integration.
- Expand focus beyond large deals to include smaller, strategic acquisitions.
- Strengthen integration processes and value realization strategies.
For dealmakers, 2025 presents both challenges and opportunities. Those who navigate these complexities effectively will emerge as the leaders in an evolving M&A landscape.
The views and opinions expressed in this article are solely those of the authors and do not necessarily reflect those of Bespoke Business Development. They are intended to encourage discussion and reflection, rather than serve as legal, financial, accounting, tax, or professional advice.