LONDON, December 5, 2024 — With lower interest rates, curbed inflation and a new U.S. administration, the outlook for 2025 is for M&A activity to build on this year’s gains. Research from WTW’s Quarterly Deal Performance Monitor (QDPM) shows a steady rise in the volume of deals valued at over US$1 billion during the last 12 months[1], a positive trend that has sparked growing confidence in corporate boardrooms for the year ahead.
After a challenging couple of years, with the market having to grapple with inflation and rising interest rates, M&A activity in 2024 demonstrated signs of recovery. However, getting complex, costly transactions right in the fast-changing world of M&A will remain a challenge for buyers and sellers. Jana Mercereau, Head of Europe M&A Consulting at WTW, looks at five critical trends that companies should track for 2025:
01
“Due to a shortage of high-quality M&A targets during 2024, corporates are now sitting on a record cash pile that must be directed somewhere. With deal flow predicted to increase during the next 12 months, investment will be focused on core revenue-generating functions that enhance competitive edge, with divestment of non-core assets.
“While the market was top-heavy during the third quarter of 2024, according to WTW data, mid-market M&A activity looks set to surge in 2025 driven by increased margin pressure, the push for scale and inorganic growth as a means to accelerate digital transformation. Under pressure to deploy vast sums of capital, private equity buyers will also see this upswing in carve outs and spin-offs as an opportunity to generate value.”
02
“Digital transformation and the burgeoning use of AI in the deal process will be a big story in 2025. Technology-driven dealmaking is being advanced by companies seeking to integrate AI capabilities - including automation, cloud computing and cybersecurity – in order to remain competitive in a digital-first world.
“With technology already cutting through every deal, the next question is whether 2025 will be a watershed moment for GenAI when the fog of hype clears and its true value is revealed, including its potential as a powerful new tool for streamlining the resource-intensive M&A process, from target identification to due diligence and integration.”
03
“Improving economic conditions and market sentiment should give much-needed predictability for buyers to plan their financing, especially for mid-sized companies reliant on borrowing, and a more stable foundation for more deal activity. The strong equity markets should also be a key driver of M&A, usually corresponding with a positive economic outlook and high CEO confidence.”
04
“2024 was the year of the ballot box with more than 50 elections worldwide and despite less political instability anticipated in the short term, geopolitics will inevitably continue to define the global M&A landscape.
“Companies will need to be ready for the risks that come with rapid changes in regional and global stability, in particular conflicts in the Middle East and Ukraine. The impact of the US and China’s trade relationship on the cost of doing business could create further complexities that dealmakers will need to navigate carefully during the year ahead.”
05
“Dealmakers will be energised by the prospect of reduced regulation and cautious as they adopt a ‘wait-and-see’ approach regarding which policies are actually enacted by the incoming White House administration. More highly regulated sectors, including finance and pharmaceuticals, where antitrust oversight could loosen, are likely to see a lift in M&A activity.”
Mercereau said: “There is already a clear consensus emerging that the M&A market is poised for a significant uptick in 2025, with technology-driven deals at the forefront. This goes beyond the implications of the ‘super election’ year of 2024, well into the future.”
WTW’s M&A practice combines our expertise in risk and human capital to offer a full range of M&A services and solutions covering all stages of the M&A process. We have particular expertise in the areas of planning, due diligence, risk transfer and post transaction integration, areas that define the success of any transaction.
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With interest rates stabilising and a pick-up in deal activity after a muted first half in 2023 fuelling cautious optimism, WTW looks at the trends to shape the M&A landscape in 2024.
