Despite challenging market conditions, M&A activity is showing resilience with a trend toward larger, higher-value transactions. While deal volumes may fall this year, the number of deals greater than $1 billion is up 19% year-over-year, signalling selective but strategic dealmaking.
Market Overview: Adaptation in Turbulent Times
The M&A market in 2025 is defined by elevated uncertainty as the new permanent state, with dealmakers needing to continuously plan and prepare rather than waiting for volatility to pass. Global M&A volumes declined 9% in the first half of 2025 compared to 2024, while deal values increased 15%, reflecting a clear shift toward larger, more strategic transactions.
Key Market Dynamics:
Quality Over Quantity
The technology sector continues to see the most M&A activity, with major deals including Google's proposed $32 billion acquisition of Wiz and significant consolidation driven by AI capabilities.
Technology Leadership
High-quality companies continue to attract competitive interest, with auctions sometimes fetching higher prices and better valuations, while lower-quality assets struggle to generate investor interest.
Regional Variations
While overall activity remains subdued globally, exceptions include India and the Middle East, where deal volumes increased by 18% and 13% respectively.
The AI Transformation Effect
Artificial intelligence is serving as both a catalyst for industry disruption and a driver of M&A opportunities, with companies rapidly developing AI agents to enhance productivity, reduce costs, and unlock new revenue streams. This has sparked a capital allocation tug-of-war between M&A and AI investment, with Big Tech companies announcing plans to spend hundreds of billions of dollars on AI infrastructure development.
Strategic Implications:
- Capability-driven acquisitions are rising in demand
- Traditional assets are being reassessed through an AI lens
- Companies face execution and cultural resistance challenges in AI integration
Valuation Trends and Geographic Shifts
Pricing Dynamics
Median global multiples have fallen to 10.8x in 2025, approximately 14% lower than Q4 2024 levels, with geographic divergence showing U.S. multiples rising while European and Asia Pacific multiples decline.
Cross-Border Activity
Despite tariff uncertainty, capital flows favour the U.S., with Americas-based buyers increasing investment by 16% while keeping 91% of capital within the region, up from 86% previously. Asia Pacific buyers more than doubled their investment into the Americas, suggesting the most sought-after assets may increasingly be U.S.-located.
Sector-Specific Trends
Growth Sectors:
- Capability-driven acquisitions are rising in demand
- Traditional assets are being reassessed through an AI lens
- Companies face execution and cultural resistance challenges in AI integration
Challenged Sectors:
- Pharmaceuticals: Facing drug pricing reform and regulatory uncertainty
- Automotive: Exposed to tariff vulnerabilities
- Retail and Consumer: Declining volumes and values
Winning Strategies for 2025
Strategic Positioning
- Flight to Quality: Focus on high-quality companies with consistent track records, strong management, and well-supported growth plans that can command premium valuations.
- Thematic Anchoring: Build clear business cases around long-term structural trends such as technological disruption, climate change, and demographic shifts rather than reacting to short-term volatility.
- Geographic Strategy: Take a nuanced view of cross-border opportunities, assessing regulatory environments, currency risks, and post-Brexit trade relationships to identify optimal deal structures and jurisdictions.
Execution Excellence
- Enhanced Scenario Planning: Systematically map regulatory, economic, and geopolitical outcomes across multiple jurisdictions while modelling currency fluctuations, regulatory changes, and market access scenarios.
- Value Creation Focus: Prioritise disciplined execution with clear value creation plans addressing market expansion, operational synergies, and regulatory compliance across different jurisdictions.
- Cross-Border Expertise: Build teams with deep understanding of multiple regulatory frameworks, tax structures, and cultural considerations essential for successful international transactions.
Looking Ahead
For 2025, macroeconomic tailwinds are anticipated to prompt increased M&A activity, building on the measured rebound experienced in 2024, with dealmakers adapting through pivots, shifts, and innovation to stay competitive.
The key message for M&A in 2025 is clear: steer with strategy, not fear. The most resilient businesses are those who confront uncertainty head-on, set bold long-term ambitions, and move with conviction to achieve them.
Success in this environment requires accepting uncertainty as permanent while focusing on fundamental value creation, strategic positioning, and operational excellence. Companies that master these elements while maintaining the agility to adapt to rapid changes will emerge as the winners in 2025’s challenging but opportunity-rich M&A landscape.
