Global M&A Predictions for 2025

Despite a challenging global M&A environment in 2024, we were involved in over 1000 transactions with a disclosed aggregate deal value of approximately USD158 billion. In 2024, we advised on more than 25 deals valued at over USD1 billion. Our commercial insight and understanding of the market environment place us in a unique position to comment on M&A trends.

Here are our predictions for 2025:

Steady growth in M&A deal activity globally

In the US, we anticipate a steady uptick in deal activity. Key drivers for increased M&A activity, such as President Trump's ambitions to bolster the US market, anticipated tax cuts and reduced regulatory burden will need to be balanced against increased tariffs, other inflationary pressures and potentially consequential interest rate rises. Across Europe, inflation in many key markets is slowing, resulting in a more stable interest rate environment as well as widespread interest rate cuts. The more settled debt markets will help to aid pricing certainty and narrow the valuation gap between buyers and sellers. Whilst 2024 saw PE houses continue to hold on to portfolio companies in the hope that valuations improve, investors are becoming increasingly impatient and are agitating for a return on their investments. We expect this investor pressure, plus the significant amount of private equity ‘dry powder’ needing to be deployed, will drive M&A activity.

Deal terms to favour sellers with longer timelines

Over recent years, deal terms have either been stable or have continued to move in favour of sellers.  We expect this trend to continue as we see more US buyers targeting acquisitions in Europe. Given the nature and increased prevalence of overseas investment, buyers are likely to continue to be cautious when pursuing acquisition targets and carry out more detailed (and perhaps phased to stagger adviser cost) due diligence. As a result, deals will take longer to complete.

Rising deal flow anticipated, driven from greater certainty

With the increasing certainty around markets and interest rates and political and other macro-conditions settling, we expect to see market participants pricing risk and valuing assets with more certainty, allowing for an increased deal flow. Whilst we did see refinancings taking place in 2024, there was a notable absence of distressed sales, which suggests that lenders are holding out for a stronger market.

Increased scrutiny and strategic shifts in global tax practices

Tax authorities are increasingly scrutinising tax practices as governments seek additional revenue to address deficits. The introduction of Pillar 2 has heightened pressure to avoid low-tax jurisdictions and influenced contractual risk allocation in tax covenants. Geopolitical risks have emerged, with tax being used as a tool for economic leverage (e.g. the US’s stance on taxing non-US companies). Recent UK case law has set a precedent for denying tax deductions on interest under loan relationship rules, posing new risks for tax planning in loan financing. Additionally, there is a continued trend towards using bespoke tax insurance products to manage specific identified tax risks.

Regulatory challenges to persist

Competition authorities are expected to continue focusing on "killer acquisitions" in 2025. The UK's Digital Markets, Competition and Consumers Act came into force on 1 January 2025, introducing a new merger control jurisdictional threshold that will allow the CMA to review acquisitions by companies with large UK turnover (GBP350 million in the previous year) and a share of supply of more than 33% of goods or services in the UK, even in the absence of a horizontal overlap with the target. Although the European Court of Justice recently limited the European Commission’s ability to accept referrals of mergers that do not meet the jurisdictional thresholds of the referring state (known as “Article 22 referrals”), it is anticipated that reviews of below-threshold "killer acquisitions" will persist.

Warranty & indemnity insurance to continue with favourable terms and a soft market

During H2 of 2024, we saw an uptick in the use of synthetic policies, with buyside counsel requiring a bespoke approach to synthetic warranties. The more tailored approach to specific elements of a transaction will continue to address issues such as immaterial jurisdictions by revenue, number of employees on multi-jurisdictional deals and a greater use of new breach cover on transactions with a short period between signing and closing. This trend will continue in 2025. Pricing rose slightly in Q4 of 2024 and will continue due to fewer new entrants into the W&I market and greater scrutiny of pricing and terms by the underwriters' (re)insurers for capacity renewals. However, pricing will still remain at considerably lower rates than in comparison to the peak seen in 2021.

Key sectors for M&A activity

We expect the following sectors to be poised for significant growth and transformation through M&A activity in 2025:

• Technology – we expect to see strong demand for data centres and connectivity solutions driven by AI integration;
• Life sciences – with a particular focus on innovation and strategic transactions, including carve-outs from large healthcare businesses;
• Energy – specifically renewables and energy efficiency projects;
• Financial services – we expect financial services companies to continue their digitalization journey through inorganic growth. We also expect to see retail banking and insurance consolidation and considerable activity in Insurtech; and
• Industrials – we expect there to be significant activity in low-carbon infrastructure investments and public/private partnerships.

For more detailed analysis of the data from our 2024 M&A transactions and commentary on the latest market trends, register your interest by clicking the button at the top of the page to receive a copy of our 2025 Global M&A Intelligence Report upon its release later this year.