M&A Sentiment Hits 5-Year High — Evening Brief – 01.09.25
Dealmaker sentiment has reached a five-year peak, with 54% of decision-makers perceiving the present M&A landscape as strong, as reported in Citizens Financial Group’s 2025 M&A Outlook. Economic expansion and declining inflation are frequently identified as key drivers of middle-market businesses’ M&A plans.
A survey of 400 companies and private equity firms indicates heightened confidence, with 57% anticipating an improvement in the U.S. economy, a rise from 47% in 2024, and 59% of companies asserting that the economic growth environment will make business easier.
Private equity firms are particularly optimistic, with 68% viewing the M&A environment as strong, an increase from 52% last year. The seller pool has notably increased, with 73% of middle-market companies identifying as potential sellers, up from 63% last year. Moreover, 64% anticipate a rise in deal flow in 2025, especially as a greater number of private equity-backed assets become available in the market.
Key trends include growing openness to partial sales, increased interest in AI capabilities acquisition, and higher consideration of international deals, with 74% of PE firms more likely to consider investments outside the U.S.
The optimistic outlook on dealmaking is further bolstered by enhanced expectations for valuations, especially among private equity firms and larger middle-market companies. Approximately 90% of all participants anticipate that valuations will remain unchanged or increase throughout the year.
“Valuations have stabilized, and buyers and sellers find themselves on fairly equal footing, which should reinforce confidence in dealmaking,” said Jason Wallace, head of Citizens M&A Advisory. “The enthusiasm is palpable, and we are seeing a high level of M&A interest among both corporates and sponsors.”
Meanwhile, private equity firms appear poised to engage in acquisitions, with 90% of sponsors forecasting an uptick in deal flow and expecting to acquire more than in 2024. This trend may foster a favorable atmosphere for dealmaking, particularly as small and mid-sized enterprises grow more at ease with private equity partners, as indicated by the survey.
“The prevailing headwinds of recent years have really moderated,” added Wallace. “We see companies and sponsors coming into 2025 with big plans and this year’s survey shows how focused they are on the growth environment.”
The survey, conducted between October and November 2024, targeted U.S.-based middle-market businesses (with revenues ranging from $25 million to $1 billion) and private equity firms (with fund sizes under $1.5 billion) engaged in the acquisition and sale of U.S.-based companies with revenues between $50 million and $1 billion.