Bankers expect global deal volumes to surpass $4 trillion next year, the highest in four years, buoyed by U.S. President-elect Donald Trump's promise of less regulation, lower corporate taxes and a broadly pro-business stance.
The total value of mergers and acquisitions (M&A) rose 15% from last year to total $3.45 trillion as of Dec. 19 this year, according to Dealogic data, recovering from a decade-low of about $3 trillion during the same period last year.
Top dealmakers expect a more deal-friendly antitrust enforcement in the U.S. next year to unshackle tie-ups that were put on hold under the Biden administration. Trump recently named Andrew Ferguson to replace Lina Khan as the chair of the Federal Trade Commission, appointing a current Republican member of the agency who is expected to ease up on policing of large corporate mergers.
"Setting aside 2021, next year could be one of the best of the last 10 years because there wasn't a lot of volatility in volume over the last decade. If global M&A volumes are up 15% or 20% next year, it wouldn't be a surprise to us at all," said Jay Hofmann, co-head of M&A for North America at JPMorgan Chase.
M&A volumes in the United States climbed 10% to $1.55 trillion so far this year, while Europe and Asia Pacific saw a 22% and 11% jump respectively, with volumes hovering around the $800 billion mark.
Recent interest rate cuts, an improved financing environment and a pickup in initial public offerings are expected to lift the fortunes of private equity firms, who were unable to sell or list portfolio companies worth several billions of dollars during the last two years when buyers and sellers were unable to agree on the price of assets and equity capital markets were largely shut for big IPOs.
"The IPO market is improving and that really helps some of the larger assets that are in sponsor portfolios for which that may be the only monetization outlet," said John Collins, global co-head of M&A at Morgan Stanley.
Leveraged buyout volumes jumped 35% to $600.8 billion this year, as private equity firms braved challenging market conditions to take several companies private, while also clinching takeovers of large targets. Blackstone's $16 billion acquisition of Australian data center operator AirTrunk, and Silver Lake's $13 billion take-private of entertainment conglomerate Endeavor Group ranked as the top LBOs of the year.
Some investment bankers warned planned tariffs under the Trump presidency could prove to be a headwind for the U.S. economy as that could drive up inflation. On Wednesday, the U.S. central bank said more reductions in borrowing costs hinge on further progress in lowering stubbornly high inflation.
"There are a lot of views that the Trump administration is going to open the flood-gates for deals. We see less of that and we're a little bit more cautious on how much will change," said Stephen Pick, head of M&A for EMEA at Barclays.
Mars' $36 billion takeover of Cheez-It maker Kellanova; Capital One's $35 billion deal for Discover Financial; and Synopsys' $35 billion takeover of design software maker Ansys were the largest M&A transactions of the year.
"Discussions around bigger deals is happening and will continue to happen because the environment is going to be more predictable (in 2025) than it has been in the recent administration," said Krishna Veeraraghavan, global co-head of the M&A group at Paul, Weiss, Rifkind, Wharton & Garrison.
Large deals buoy volumes
While the number of transactions worth over $10 billion grew at a robust pace in 2024, the overall deal count fell from last year as a tough regulatory environment and election-year uncertainty forced companies to postpone their pursuit of transformational tie-ups. Despite those headwinds, 37 deals valued at more than $10 billion were announced, compared to 32 last year.
A booming U.S. economy, pent-up demand, and trillions of dollars of unspent capital sitting on corporate balance sheets should result in more deal activity in the near term, bankers said. Top investment banks are starting to ramp up hiring to ensure deal teams are fully staffed to handle the expected surge in transaction volumes.
"With Trump lowering taxes and promoting deregulation, companies may be more willing to invest their cash in M&A, instead of distributing it to shareholders," said Nestor Paz-Galindo, global co-head of M&A at UBS.
With the outlook for U.S. corporate earnings looking brighter, cross-border M&A activity is also expected to improve as cash-flush foreign buyers increasingly eye attractive U.S. targets. Fast-growing economies in Asia are also increasingly being viewed as attractive for opportunistic private equity firms.
"Given their unique dynamics and tailwinds, Japan and India both saw a growing focus from sponsors translating into strong momentum in deal volume and we expect that to continue for both markets in 2025 as sponsor M&A returns globally and in the region,” said Raghav Maliah, global vice chairman of investment banking at Goldman Sachs.
Deal advisers noted that the rate of dealmaking heading into 2025 is starting to return to levels seen in the pre-pandemic years of 2018 and 2019, when deal volumes averaged about $4 trillion a year.
A flurry of large deals have been announced in recent weeks, including Omnicom's $13 billion merger with rival advertising giant Interpublic Group, and Arthur J Gallagher's $13.4 billion takeover of insurance broker AssuredPartners.
"People who are predicting that everything's going to be rolling from January are probably a bit overly optimistic. It's all trending in the right direction. I'm not convinced we'll see another (record) year like 2021 but I'm hopeful that it will be a bit more like 2019 or 2020, right before COVID," said Daniel Wolf, an M&A partner at Kirkland & Ellis.
The technology sector accounted for the largest share of M&A activity this year, jumping more than 20% year-on-year to $534 billion globally.
"The types of deals that we're seeing in the works are of the type that we saw fewer of over the last couple years and it feels like there's a lot of excitement to do big, transformational deals," said Mark Bekheit, global vice chair of the M&A practice at Latham & Watkins.
