The tipping point for AI, consolidation in the mid-market and other M&A trends for 2025.
With lower interest rates, controlled inflation, and a new U.S. administration, the outlook for 2025 is optimistic: M&A activities are expected to build on the positive momentum of this year.
Research from WTW’s Quarterly Deal Performance Monitor (QDPM) reveals a steady increase in the number of deals valued at over one billion dollars over the past twelve months. This positive trend has significantly boosted boardroom confidence for the coming year.
Five M&A trends for 2025
After a challenging period marked by inflation and rising interest rates, M&A activities in 2024 showed signs of recovery. However, buyers and sellers still face challenges in successfully completing complex and costly transactions in an ever-evolving M&A landscape.
Jana Mercereau, Head of Corporate M&A Consulting for Europe at WTW, highlights five crucial trends for companies to watch in 2025:
1. Consolidation and growth in the mid-market segment
Following a shortage of high-quality M&A targets in 2024, companies now hold record amounts of cash that must be deployed. With an expected increase in deal flow over the next twelve months, the focus will shift to investments in core revenue-generating activities that enhance competitive positioning, while non-core assets are divested.
“WTW data shows that the market in Q3 2024 primarily focused on large deals, but a significant rise in mid-market M&A activities is anticipated for 2025. This growth is driven by increasing margin pressures and the pursuit of inorganic growth as a catalyst for digital transformation. Private equity players, under pressure to deploy large amounts of capital, will also view the rise in carve-outs and spin-offs as an opportunity to create value.”
2. The tipping point for AI
Digital transformation and the expanding use of AI in deal processes will be a key theme in 2025. Technology-driven dealmaking will gain momentum as companies aim to integrate AI capabilities – such as automation, cloud computing, and cybersecurity – to remain competitive in a digital world.
“With technology already playing a crucial role in every deal, the question is whether 2025 will mark the tipping point for Generative AI (GenAI). This could be the year when hype gives way to realistic expectations and the true value of AI becomes evident, including its role as a powerful tool to streamline the intensive M&A process – from target identification to due diligence and integration.”
3. Economic stability
“Improving economic conditions and a more positive market sentiment will provide buyers with the much-needed predictability to finalize their financing plans. This is especially relevant for mid-sized businesses reliant on loans. A more stable foundation will lead to increased deal activity. Strong equity markets will also be a driving force for M&A, as they typically align with positive economic outlooks and high CEO confidence.”
4. Geopolitical uncertainties
“2024 was marked by over fifty elections worldwide. While short-term political instability is expected to diminish, geopolitics will inevitably continue to shape the global M&A landscape.
“Companies must be prepared for the risks associated with rapid changes in regional and global stability, particularly conflicts in the Middle East and Ukraine. Additionally, the impact of U.S.-China trade relations on the cost of doing business may add further complexities, requiring dealmakers to navigate carefully in the coming year.”
5. Regulation
“Dealmakers will find encouragement in the prospect of reduced regulation while adopting a cautious stance as they await the policies implemented by the incoming U.S. administration. Highly regulated sectors, such as financial services and pharmaceuticals, where antitrust oversight could be relaxed, are likely to see an uptick in mergers and acquisitions.”
“A clear consensus is emerging that the M&A market is primed for significant growth in 2025, with technology-driven deals at the forefront,” concludes Mercereau. “This trend extends beyond the implications of the ‘super election year’ of 2024 and will shape the future well beyond.”
Read also: Private Equity: Market predictions for 2025 and the greatest challenges
