A Hot M&A Market in 2025 — Evening Brief – 12.16.24
Dealmakers are preparing for a potential spike in M&A activity under the Trump administration, anticipating a less rigorous antitrust environment that may catalyze a wave of pent-up transactions starting early next year, provided economic growth persists.
The global M&A market is projected to recover to approximately $3.5 trillion this year, aligning with the pre-pandemic peak levels of the mid-2010s, according to the latest data from Bain & Company, and that 2024 is ending as it had begun, with investors anticipating “a break in the buyer-seller logjam.”
The business management consultant stated that 2024 has been characterized by careful adaptation, as dealmakers adjust to the new reality of elevated interest rates and stringent regulatory oversight. The firm’s forecast for M&A value this year would be a 15% increase year-on-year, while global deal volume is projected to rise by 7%, reversing a two-year downturn.
“As interest rates moved slightly lower, private equity and venture capital regained ground, with private equity deal value up 29% and venture capital’s up 30% year over year,” the authors of Bain’s Looking Back at M&A in 2024: Dealmakers Adapt as the Market Idles, wrote. “Corporate M&A, which is less influenced by small movements in the cost of debt, is on track to end the year 12% above 2023, with steady growth across all regions.
Investment management firm Man Group is similarly bullish on M&A, expecting healthcare, technology, and energy to be M&A “hotspots” as these sectors have historically exhibited a significant desire for consolidation, however numerous transactions have been impeded by concerns over regulatory backlash.
“Healthcare M&A, previously focused on small biotech acquisitions, is likely to expand to include more mature targets. Energy companies, particularly in exploration and production, will likely pursue further consolidation,” wrote Man Group in its latest View from the Floor commentary.
The firm contends that mega-cap technology remains a focal point of political contention, even under a Trump government, due to ideological disparities. However, stripping out the likes of big platforms such as Alphabet, Amazon, Microsoft, and Meta Platforms, the “tech sector overall still has numerous eager acquirers who stand outside the regulatory crosshairs of a Republican DOJ or FTC,” added Man Group.
Bain & Co conducted a survey of over 300 M&A executives and discovered that the principal impediment to M&A activity continues to be the disparity in valuation expectations between buyers and sellers. It said a key contributing factor was the distance between historically low strategic M&A valuations (10.4x EBITDA/EV) and high public market valuations (16.6x for S&P 500).
“Despite strong balance sheets and a strategic need for M&A in 2024, dealmakers didn’t see the positive momentum they hoped for on interest rates, seller willingness to exit, and regulatory scrutiny that would drive a full recovery this year,” said Suzanne Kumar, EVP of Bain’s M&A and divestitures practice.
Deals valued at less than $1 billion accounted for 95% of all activity in 2024, and the number of those deals grew for the first time in four years. Megadeals – those valued at greater than $5 billion – boosted deal value, the Bain report said.
Despite the prevailing optimism, Man Group cautioned about potential headwinds. While the Federal Reserve’s easing cycle and diminishing risk of a recession offer a tailwind, the anticipated growth in M&A deals may not happen if economic conditions turn down.
“Even in a less stringent antitrust regime, dealmakers and CEOs are likely to pursue bolder deals that push the boundaries of what is permissible under the new administration,” noted Man Group. However, these risks can also present an attractive opportunity set, as they will mean healthily wide merger arbitrage spreads compared to an environment where almost all deals are expected to close with high certainty.”