The global M&A markets may finally be back on an upward trajectory as some of the economic and geopolitical uncertainties weighing on the market over the past couple of years lift. But will 2025 be a great M&A year or just another so-so one? Recent dealmaking momentum at the top end of the market suggests the upswing has already begun: the volume of deals greater than $1bn in value increased by 17% in 2024, and their average value rose. But we are also seeing some mixed signals: the volume of smaller and mid-sized deals fell by a meaningful 18% in 2024, and in the year ahead, dealmakers will need to keep their eye on some wild cards.
Deals that exceed $1bn only made up a sliver (about 1%) of the approximately 50,000 M&A deals announced globally last year, but these larger transactions often have an impact that goes beyond the actual acquisition in question. They set the tone for the whole market and grab the headlines. Executives seeing large deals happening around their industries often start to gain confidence to move forward more aggressively with their own M&A plans to stay competitive and for fear of missing out.
Several factors underlie the new-found M&A momentum. They include an intense CEO focus on growth and transformation in this new era of AI, greater capital availability, and an increased supply of assets expected to come to market—both private equity (PE) portfolio companies and non-core assets being divested by corporates. Nonetheless, dealmakers can’t ignore the wild cards, which include:
Volatile and uncertain geopolitics. Dealmakers and markets are still digesting the outcomes of the elections that took place in many countries during 2024 and the resulting changes to policy direction; in particular, the impact of the new Trump administration in the US as his policies and recent presidential executive orders, reverberate across the globe. Dealmakers should expect the unexpected.
Long-term interest rates are rising again. Inflation has continued to moderate, and central banks, including the US Federal Reserve, have reduced interest rates in recent months. However, the momentum behind rate cuts has slowed, and with long-term interest rates rising in the US and elsewhere, this could make returns harder to find and lead to more challenging refinancing processes.
Valuations are high in some countries. In mid-January 2025, the forward price-to-earnings ratio for US stocks (based on the S&P 500) was 22.87, compared with 13.67 for non-US international stocks (based on the S&P International 700). Companies with higher valuations may use their stock as part of an inorganic growth strategy. We may also see more cross-border deals as US companies, buoyed by a strong US dollar, seek opportunities overseas, particularly in Europe.
‘An M&A recovery is overdue, but it may struggle to maintain its recent momentum at a time when long-term interest rates are rising and valuations are high. It’s a market that will distinguish top dealmakers from the rest. To be successful, they will need deep industry expertise and a laser focus on value.’
Brian Levy,Global Deals Industries Leader, PwC United StatesGeopolitics and the ‘Trump effect’
Several major global economies, such as Canada, France, Germany, and South Korea are facing political instability, and many have national elections in 2025. The impact of the Russia–Ukraine war, the potential calming of the conflict in the Middle East, and the collapse of the Assad regime in Syria are events that also have a significant economic impact on the countries involved and their neighbours. We also can’t ignore the role of China on the geopolitical stage, given its position as the world’s second-largest economy and heightened political tensions in its relations with several countries.
The impact of the US election, in particular, is reverberating around the world, and the new administration’s policies may have significant—but at times contradictory—implications for M&A, not only in the US but also globally.
Industry-specific impacts
Trump has campaigned on a range of issues that could play out for M&A in different ways by sector, with any meaningful change serving as a catalyst for deals. For example:
Manufacturing, construction, agriculture, retail and healthcare. Policies to limit immigration might create labour shortages and spark inflation in these and other sectors. The imposition of tariffs may cause significant disruptions to supply chains for US multinationals that import goods into the country and may also create disruption for those exporting products if retaliatory action is taken.
Defence. Trump campaigned on a promise to end the wars in Russia–Ukraine and the Middle East. Although there is hope these conflicts will end this year, global defence spending is expected to continue. Focus areas may shift driven by the broader geopolitical landscape and potential for future conflicts but we expect strong defence budgets for at least the next ten years.
Energy production. A focus by the new US administration on increasing domestic oil and natural gas production will likely be a positive for the US energy sector. Despite uncertainties such as changes to the Inflation Reduction Act’s energy credits, renewable energy is expected to continue to benefit from long-term support for energy transition and AI’s growing demand for power.
Healthcare and pharma. Policy changes from the new Trump administration are expected to focus on disease prevention and personalised care, which will continue to spur innovation in the biopharmaceutical and healthcare sectors in the US. Although deregulation may benefit M&A in the healthcare and pharmaceutical sectors, the potential threat of tariffs and impacts to global pharmaceutical supply chains will be important to monitor going forward.
Telecommunications. Trump’s appointed Federal Communications Commission (FCC) chairman, Brendan Carr, has supported satellite initiatives and historically voted against telecom regulation. This may create a more favourable environment for transactions and prompt consolidation in the private satellite and telecoms sectors.
Technology. After taking office, among other actions, Trump has reversed former president Biden’s executive order on AI safety standards and announced a $500bn joint venture between OpenAI, Oracle and SoftBank that aims to build a network of data centres across the US. Software companies may benefit from a less stringent stance from the Federal Trade Commission (FTC), paving the way for more megadeal activity. However, the big tech and social media sectors may continue to face challenges, including calls for the biggest players to be broken up.
Interest rates
The US Federal Reserve’s rate cuts in 2024, along with similar rate cuts by other central banks (including the European Central Bank and the Bank of England), have helped fuel the new M&A momentum to date. In the US, rates were cut by 100 basis points between September and December 2024.
However, long-term rates have increased: the yield on a ten-year US Treasury note rose to just under 5% in early January. Long-term rates have also increased in the UK and other countries. This creates greater uncertainty regarding the timing and degree of future rate cuts in 2025. Further cuts will depend on the strength of the local economy and whether inflation continues to cool. Higher rates and slowing growth make deal economics more challenging.
Even though long-term rates have moved higher, yields in the leveraged loan market fell during 2024, largely because of growing competition between private credit and banks returning to the lending market. In 2024, lending by banks increased in the investment-grade debt market, high-yield bond market and leveraged loan market. Debt issuance in the US and European high-yield bond markets reached $388bn in 2024, up 74% from 2023. US and European leveraged loan market issuances more than doubled to $770bn in 2024. This greater capital availability helps provide the fuel for M&A.
The deals imperative grows stronger
Three key trends in today’s market are intensifying and we believe they will heighten the deals imperative, leading to more M&A activity in 2025. First, companies are focused on growth and transformation; second, AI is acting as a catalyst for change and reinvention; and third, PE players are under increasing pressure to exit mature portfolio company investments.
A focus on growth and business transformation
According to PwC’s 28th Annual Global CEO Survey, published in January 2025, only 38% of CEOs were ‘extremely’ or ‘very’ confident about their company’s prospects for revenue growth over the next 12 months. That figure increased to 53% when respondents were asked about their company’s prospects over a three-year horizon. This suggests CEOs expect that current actions or future planned actions will lead to further growth of their company’s top line. This is especially important in an economic environment with slowing growth, in which many companies are finding organic revenue growth much harder to achieve.
‘While the deal environment is characterized by uncertainties, in Austria we see positive signs for deals activity in the second half of 2025 as distressed M&A transactions and refinancings picking up and the opportunity for CEOs to transform their businesses through M&A.’
Gerald Eibisberger,Deals Leader, PwC AustriaM&A as a growth strategy
M&A continues to be an essential strategic element in helping companies shape their future, transform their business models and generate growth. Companies need to systematically review and rethink their value chains, distribution channels, customer communications, technology platforms and all other aspects of their operations to identify new ways of doing business to stay relevant, particularly in an environment that is being disrupted broadly by technology, specifically by AI, and universally by other global megatrends.
We expect that dealmaking activity will include acquisitions focused on both revenue and margin growth, with the intent of accessing new markets, enhancing capabilities and improving operational efficiencies. Given the significant costs of investing in technology and AI, the advantage goes to larger companies that have the investment capacity. We are also seeing a similar trend in highly regulated sectors such as banking and insurance, in which deals aimed at increasing scale can help spread anticipated cost increases associated with regulatory compliance across a wider customer base.
Divestitures to drive business transformation
Another trend we expect to see more of in 2025 is the refining of corporate portfolios as companies look to fill capability gaps and divest non-core or low-growth assets. In sectors including the industrials, consumer health and entertainment, among others, large corporates have been separating themselves from non-core business, either through spin-offs or sales. Recent examples include GE’s split into three public companies; Sanofi’s decision to transfer a controlling stake in its consumer health business, Opella, to CD&R, and Comcast’s plan to spin off its NBCUniversal cable TV networks, along with complementary digital assets.
Source: PwC’s 28th Annual Global CEO Survey, January 2025
AI as a catalyst for change
Another factor that could significantly affect M&A is how the AI wave plays out at a company and market level as a catalyst for change and reinvention. For now, market expectations for AI and its potentially transformational capabilities are sky high, with about half of CEOs in our latest survey expecting GenAI to increase their company’s profitability in the year ahead. However, it's worth noting that actual performance is somewhat below CEO expectations expressed in last year's survey. In 2024, 46% said they expected to see profitability improvements. A year later, when asked if they had seen those gains, only 34% said they had.
Despite this, the conviction about the technology’s disruptive power continues—and as outcomes improve, we expect this to create M&A tailwinds, not only in the technology sector but across all sectors. Companies around the world are accelerating their transformations to adopt AI at scale, with the aim of creating greater efficiencies and new revenue opportunities, partnerships and processes. Those that figure out how to harness the power of AI may be able to turn it into a deal-making advantage.
AI is supercharging investments and attracting trillions of dollars in capital
AI is not only attracting investment in AI companies but also has supercharged investment in the digital infrastructure required to support it, including data centres and power generation capabilities. Capital expenditures of as much as $2tn are expected over the next five years to build and facilitate new data centres in the US and globally. The investment for now is predominantly taking the form of direct investments or partnerships versus traditional M&A.
This AI-led capital expenditure ‘super cycle’ will likely affect M&A in two ways: first, there could be a crowding out of M&A as investor allocations shift from a strategy of ‘buy’ (via M&A) to one of ‘build’ (via capital expenditures, partnerships and strategic alliances); second, we expect to see more opportunities to capture market share and value by making strategic acquisitions of companies or assets that are positioned within the AI value chain.
Examples of investments in data centres and digital infrastructure include the following: DigitalBridge and Silver Lake’s $9.2bn equity investment in Vantage Data Centers, completed in June 2024; the AI partnership between BlackRock, Global Infrastructure Partners, Microsoft and a leading AI investor from the Middle East, announced in September 2024, to fund up to $100bn; Blackstone’s $16bn acquisition of AirTrunk, completed in December 2024; and the ‘Stargate’ joint venture between OpenAI, SoftBank and Oracle, announced in January 2025, to fund up to $500bn.
One example of an investment in power generation is Microsoft’s September 2024 signing of a power purchase agreement with Constellation Energy to restart Crane Clean Energy Center (formerly Unit 1 of Three Mile Island Nuclear Power Station); another example is Google’s announcement in December 2024 of a new partnership with clean energy developer Intersect Power and with TPG, which plans to invest $20bn in renewable power infrastructure by 2030 to enable the buildout of new data centre capacity in the US, powered by clean energy.
These investments in data centres, digital infrastructure and power generation are emblematic of changes in the business landscape related to themes or domains of activity. These domains of activity are creating cross-sector dependencies that are leading to new business models, partnerships and avenues for growth, all of which are likely to boost further opportunities for dealmaking.
Private equity exit pressure grows
Over the past three years, below-average levels of PE exits have resulted in rising average holding periods for PE portfolio companies. We anticipate more PE-backed companies coming to the market in 2025 due to mounting pressure from limited partners on PE firms to exit these older investments. PitchBook data indicates that nearly half of the 29,400 PE portfolio companies worldwide have been held since 2020.
M&A volumes and values in 2024
Deal values increased 5% between 2023 and 2024, whereas deal volumes decreased by 17% over the same period. Regional trends were similar to global, but varied at a country level. In the Americas, deal values in the US grew 6%; in EMEA, several megadeals in the UK led to an increase in deal values for the country—in contrast to many other European countries where deal values declined; and in Asia Pacific, Japan and India performed strongly with 24% and 20% increases in deal values, respectively. In terms of deal volumes, each region experienced a decline compared to 2023.
More $1bn plus deals. The number of deals valued at greater than $1bn increased from 430 in 2023 to more than 500 in 2024. This has boosted average deal sizes by 11%, to $146m in 2024. The number of small to mid-sized deals is still languishing, partly because of continuing valuation gaps between buyers and sellers and a challenging PE market.
Behind this upward trend in deals of more than $1bn are corporate dealmakers—some of them having been able to use their companies’ highly valued stock as currency—and top PE funds that are looking for larger deals as they raise historic amounts of capital.
Megadeals activity expands. Of the 502 deals in 2024 valued greater than $1bn, 72 were megadeals (deals greater than $5bn), compared to only 61 in 2023. In early 2024, most megadeal activity was in the technology, energy and banking sectors. However, in the second half of the year, we saw a broadening out into other sectors. In the second half of 2024, although technology remained in first place, insurance climbed to second place and media and entertainment came in third place.
In 2024, each of the top three deals was in a different sector: in retail, Couche-Tard’s $39bn offer to acquire Seven & i Holdings Co (known for its 7-Eleven franchise); in banking, Capital One’s proposed $35.3bn acquisition of Discover Financial Services; and in software, Synopsys’ proposed $32.5bn acquisition of Ansys.
M&A trends by sector
Deal values increase in many sectors. Several sectors had higher deal values in 2024 than in 2023, with entertainment and media, technology, and aerospace and defence, as well as the financial services sectors of banking, insurance and asset and wealth management all having some notable megadeals. Deal values in the pharma and life sciences sector decreased by 36% in 2024 because of a drop in the number of megadeals (from ten in 2023 to four in 2024). Deal values also decreased in the oil and gas sector because of two deals worth more than $50bn each announced in 2023.
Deal volumes declined across all sectors. Every sector saw a decrease in deal volumes between 2023 and 2024, although the decreases varied from -2% for the mining sector to -27% in the technology sector.
‘Deal volume decreased in Austria in line with the global development in smaller and mid-sized deals. In contract to the global development, the number of deals in the TMT sector remained stable and even improved its relative share.’
Gregor Zach,M&A Leader, PwC AustriaFor dealmakers, finding the path forward
To be successful, dealmakers will need to be prepared to answer some tough questions, including the following:
How could AI affect the business model of the company you plan to acquire? This will require critical analysis and scenario planning, including factoring in the cost of enabling AI at the target or acquiring company.
In a market with robust valuations and slowing economic growth in some countries, how can returns meet expectations? This will require making value creation a priority and building accountability frameworks.
What alternative options exist in the event of a failed refinancing or a difficult, delayed or halted M&A process due to the debt surpassing the company’s enterprise value? In such situations, dealmakers will need to develop a plan B, or even a plan C.
Where in the world are there still opportunities for investors? Cross-border opportunities may become more challenging, but the risk may be worth the reward with thoughtful linkage between corporate strategy, deal thesis and country geopolitical risk assessment.
What are the geopolitical implications, including for national security, of any deal being considered? Careful scenario planning, including creating a framework of corporate agility and strong contingency plans, will pay dividends.
True dawns, false dawns
These are indeed complicated times for the M&A markets. So much seems to be in place for a resurgence of dealmaking on both the buy side and the sell side. Yet some important aspects, from valuations and interest rates to geopolitics, create pressure that can’t easily be brushed aside. Market expectations for an M&A rebound have disappointed over the past two years, and there are no guarantees that this new dawn for M&A in 2025 won’t prove to be another false dawn. Yet this time, many more of the stars are aligned. If the large deal activity continues, in a market like this, momentum can quickly become a self-fulfilling prophecy. The stakes are high, and the trajectory may well not be linear, but we are confident that the momentum for M&A in 2025 will be there, particularly in the second half. But will it be enough to make M&A great again? We surely hope so—and financial markets are counting on it.