M&A activity outlook
December 2025 | MARKET PULSE | MERGERS & ACQUISITIONS
Financier Worldwide Magazine
December 2025 Issue
In a world recalibrating itself after years of economic turbulence and geopolitical flux, mergers and acquisitions have re-emerged as a strategic compass for global business. More than instruments of expansion, M&A deals are being shaped by a complex matrix of technological ambition, regulatory scrutiny and shifting investor expectations. From boardrooms in London to innovation hubs in Bangalore, dealmakers are navigating a landscape where agility, foresight and cultural fluency are as critical as financial acumen. This global M&A environment is filled with companies adapting, innovating and positioning themselves for long-term value in an era defined by transformation.
A dynamic interplay of macroeconomic recovery, geopolitical tension, technological disruption and strategic recalibration is defining global M&A. While dealmakers face persistent challenges, the year has also ushered in renewed optimism and a surge in high-value transactions. According to McKinsey, global deal value for transactions over $25m rose by 22 percent in the first half of 2025, reaching $2 trillion. This resurgence signals a market regaining confidence, albeit cautiously.
Strategic resilience in a volatile world
The first half of 2025 was marked by volatility – trade policy shifts, regional conflicts and regulatory unpredictability. Yet, dealmakers have demonstrated resilience. McKinsey notes that many top performers have adopted programmatic M&A strategies, focusing on core business consolidation and geographic expansion while avoiding speculative transactions. This disciplined approach has enabled firms to thrive despite external shocks.
Private equity (PE) firms, which had retreated in recent years, have returned with vigour. The value of PE-led transactions rose by 33 percent to $471bn in the first half of the year. This resurgence is driven by a combination of investor pressure for exits, record levels of dry powder – estimated at $2.2 trillion – and regulatory developments that may soon allow broader retail access to PE markets in the US.
Meanwhile, PwC’s mid-year outlook highlights a paradox: while global M&A volumes declined by 9 percent compared to the same period in 2024, deal values increased by 15 percent. This reflects a shift toward larger, more strategic transactions, particularly in sectors less exposed to tariff risks. The number of deals exceeding $1bn rose by 19 percent, and those above $5bn increased by 16 percent.
In the UK, according to Mark Wilson, founder and managing partner at Headpoint Advisors, the landscape is mixed. “The US tariff programme has no doubt had an impact on British firms, especially on businesses that source manufactured product from China and sell into the US,” he says. “Companies are sacrificing margin in the short term as they maintain their supply chains, but look to remedy that by changing their manufacturing partners. One of the beneficiaries is Vietnam, which has a more attractive tariff regime.
“Consequently, this realignment is a slight drag on deal volumes and valuations,” he continues. “For technology businesses, from data analytics to software and agentic AI, the picture remains much more stable. Appetite to invest and acquire UK businesses remains strong, both from the US and Europe. We are optimistic about the continued strengthening of M&A activity levels and valuations.”
Technology, AI and the capital allocation dilemma
Technology continues to dominate M&A activity. According to Bain & Company, the most successful companies are aggressively pursuing value creation through acquisitions that enable digital transformation, automation and AI integration. Generative AI (genAI), in particular, is reshaping deal strategy. Bain reports that 70 percent of PE firms have abandoned deals upon discovering that genAI could negatively impact the target’s business model.
This technological ferment is creating a capital allocation dilemma. As PwC observes, executives must now weigh M&A against massive investments in AI infrastructure, talent and capability development. Big tech firms are leading a supercycle of capital spending, which is expected to reach multitrillion-dollar levels over the next five years. Consequently, some companies are opting for minority stakes, partnerships or carve-outs to pursue strategic goals while preserving financial flexibility.
The sectoral landscape is also shifting. McKinsey reports that technology, media and telecoms has overtaken global energy and materials as the most active sector globally, with a 39 percent increase in deal value. Financial institutions and healthcare are also prominent, particularly in Europe and the Middle East, where healthcare deal value rose by 95 percent year-on-year.
“Firms that embrace complexity, invest in cultural and operational integration and align their acquisitions with long-term strategic goals will be best positioned to lead in the post-pandemic, post-globalisation era.”
“We are seeing the impact of AI across all sectors now, and increasingly in processing infrastructure,” notes Mr Wilson. “For example, demand for next generation data centres is driving interest in suppliers of power generation, transmission infrastructure, heating, ventilation and air conditioning systems, and computing hardware. There is a lot of appetite from both strategic and financial investors for deals in these areas, which is naturally influencing valuations.
“It is important to consider the impact of AI on prospective clients prior to engaging with them,” he continues. “As M&A advisers, it is critical for us to avoid taking on deals that may fall over. We consider their business models and whether AI will enhance or undermine their ability to generate revenues and maintain profit margins in the near future. It is not a perfect science, however recognising that AI will only improve from here on in tends to drive our thought process.”
Geopolitics, regulation and the post-globalisation era
Geopolitical instability remains a significant drag on M&A optimism. A McKinsey Global Survey found that 35 percent of executives view geopolitical risk as the greatest threat to domestic growth, with trade policy concerns close behind. These anxieties are particularly acute in North America, where 56 percent of respondents cited trade as a disruptive force.
Regulatory scrutiny is intensifying. Bain notes that the relatively new administrations in the US and EU are signalling more openness to M&A, but national interests and protectionist policies continue to complicate cross-border transactions. In India, revised merger guidelines and streamlined approval processes are encouraging deal activity, while the UK’s Competition and Markets Authority is favouring behavioural remedies over structural ones.
The post-globalisation era is prompting companies to reassess their global footprints. Bain highlights a shift from a bipolar (US-China) to multipolar (US-EU-China) dynamic, with firms pursuing acquisitions to secure access to key markets and supply chains. This realignment is driving both inbound and outbound M&A, particularly in regions like India and the Middle East, where deal volumes have increased by 18 percent and 13 percent respectively.
Agility, integration and value creation
As Deloitte’s 2025 M&A trends survey reveals, agility and flexibility are now essential competencies for dealmakers. The most successful firms are embedding technology into their deal processes, leveraging genAI for due diligence and integration planning. Risk management has evolved, with data-driven insights enabling more precise valuations and synergy capture.
Post-merger integration is receiving renewed attention. McKinsey reports that announced cost synergies as a percentage of transaction value have nearly doubled since 2015, while revenue synergies have increased eightfold. This reflects a strategic shift toward faster value realisation and more rigorous integration planning.
In addition to traditional financial metrics, cultural compatibility is emerging as a decisive factor in post-merger success. Companies are investing in cross-cultural training and leadership alignment programmes to mitigate integration risks. This is particularly relevant in cross-border deals, where misaligned expectations and communication breakdowns can erode value.
As Mr Wilson points out, the most successful strategic acquisitions, especially in the mid-market, rely on certain fundamentals. “Probably the most important single factor is leadership, or more specifically, executive sponsorship of the acquisition – having an individual with ‘skin in the game’, in as much as that person’s career will be materially impacted by the success, or failure, of the acquisition.
“This generally means that more thought is given to cultural alignment prior to completion, as it is very difficult to re-engineer culture post-deal without leaking valuable team members. Having a comprehensive 100-day plan, ready to go on day one, with clear responsibilities and incentives is vital. Buy-side dealmakers can play an important role in facilitating planning throughout the deal process, however it is incumbent on the sponsor to drive through the post-deal plan,” he adds.
Environmental, social and governance (ESG) factors are also influencing deal strategy more profoundly than ever. Investors are scrutinising targets for sustainability credentials, carbon footprint transparency and ethical supply chain practices. Firms that fail to meet ESG benchmarks are increasingly excluded from consideration, regardless of their financial performance.
Moreover, the rise of activist investors is reshaping boardroom dynamics. These stakeholders are demanding clearer M&A rationales, more transparent integration plans and faster returns on investment. Their influence is prompting companies to adopt more rigorous pre-deal modelling and post-deal accountability frameworks.
Despite the challenges, the outlook for M&A in 2025 remains broadly positive. As Bain concludes, intrinsic demand for deals is high, and companies are increasingly turning to M&A as a tool for strategic transformation, portfolio optimisation and competitive advantage. With macroeconomic conditions stabilising, regulatory headwinds easing and technological disruption accelerating, the stage is set for a compelling run of months ahead.
Deal trajectory
As companies recalibrate their strategies in response to global pressures and technological acceleration, dealmaking is becoming more nuanced, more deliberate and more transformative. The convergence of AI, ESG imperatives and shifting geopolitical alliances is redefining what constitutes a successful transaction. In this environment, agility is not optional; it is foundational.
Firms that embrace complexity, invest in cultural and operational integration and align their acquisitions with long-term strategic goals will be best positioned to lead in the post-pandemic, post-globalisation era. M&A has evolved beyond a growth mechanism, now serving as a strategic engine for resilience, reinvention and continued relevance.
CONTRIBUTOR:
Mark Wilson is founder and managing partner at Headpoint Advisors. He can be contacted on +44 7966 319161 or by email: markwilson@headpointadvisors.com.
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