The Big Picture 2025: M&A

The mergers and acquisitions (M&A) market is poised for a strong recovery in 2025, driven by favorable economic conditions and growing business confidence. After a slowdown in recent years, dealmaking is set to pick up as several key factors come into play.

One of the main drivers is the ongoing rate-cutting cycle that began in 2024. Lower interest rates make financing more affordable, helping to close the gap between buyers and sellers. By Q4 2024, global M&A transaction values had risen to $714.77 billion, a significant improvement compared to $501.89 billion in Q1 2023. This trend is expected to continue in 2025 as businesses take advantage of the reduced cost of acquisition financing.

Private equity firms are well-positioned to lead the way, with substantial amounts of capital ready to deploy. In 2024, these firms announced 18 deals valued at over $5 billion each, marking one of the most active years for large-scale private equity transactions since 2021. They also entered the year with a record $2.6 trillion in unspent capital, commonly referred to as “dry powder.” Target industries such as artificial intelligence, cloud security, and defense have been key drivers, supported by global trends in digital transformation and heightened geopolitical tensions.

The oil and gas industry is also experiencing a surge in mergers, with North American deal values reaching a record $225 billion over the last four quarters. High-profile transactions, such as Chevron’s $61 billion acquisition of Hess, have demonstrated the sector’s resilience despite regulatory scrutiny. Meanwhile, the tech sector is experiencing a slower recovery due to antitrust concerns and slowing revenue growth. However, private equity remains active, contributing to tech M&A spending, which surpassed $362 billion by September 2024—a 40% increase from the prior year.

Additionally, political stability following global elections in 2024 is expected to boost executive confidence. Clearer leadership, particularly in the U.S., is likely to encourage more businesses to pursue acquisitions. With lower financing costs, strong sector opportunities, and increased political clarity, 2025 is shaping up to be a promising year for M&A activity across multiple industries.