M&A Market Anticipates Resurgence in 2025 as Challenges Diminish

The Mergers and Acquisitions (M&A) landscape is gearing up for a much-anticipated rebound in 2025, according to Bain & Company’s newly released Global M&A Report. This revival comes after a challenging period marked by lackluster deal activity over the previous three years. The firm highlights that two significant obstacles—high interest rates and tight regulatory environments—are expected to ease, creating a more favorable climate for deal-making.

Bain’s research indicates that, although the M&A activity has struggled recently, intrinsic demand remains robust. Businesses continuously seek growth avenues, focusing on risk and reward amidst fluctuating economic conditions, supply chain disruptions, and geopolitical uncertainties. Furthermore, financial investors are inclined to allocate capital, as they also face pressure to generate liquidity and profitability.

The report notes that numerous companies, including corporations, private equity firms, and venture capitalists, are preparing to sell assets once market conditions improve. The combination of strategic refocusing and ambitious growth strategies sets the stage for a more dynamic M&A environment.

Driving Forces Behind the Upswing

Several catalysts are expected to drive the expected M&A resurgence. As noted by Les Baird, a partner at Bain, while there was a modest recovery last year, deal values as a percentage of global GDP remain notably low. However, as adverse market factors diminish, companies that have successfully navigated previous challenges will likely lead the charge. The ongoing trends suggest that companies are cautious yet ready to pursue acquisitions that align with their long-term objectives.

In addition, the emergence of new political administrations in both the U.S. and the European Union heralds a more favorable regulatory climate for M&A activities. Strategic dealmakers are likely to focus on identifying the right opportunities that promise sustainable growth, regardless of short-term market fluctuations.

Technology advancements are another critical factor in shaping the future of M&A. The report emphasizes that disruptions driven by technologies such as generative AI, automation, renewable energy solutions, and quantum computing will necessitate companies to either acquire these capabilities or develop them internally to stay competitive. The appetite for tech acquisitions is particularly pronounced among both tech and non-tech firms, signaling a significant trend toward strategic innovation through M&A.

The Role of Generative AI

Bain’s survey of over 300 M&A professionals reveals that a striking 21% are currently leveraging generative AI in their deal-making processes—a notable increase from 16% the previous year. By the end of 2025, it is anticipated that one in three M&A practitioners will be utilizing this transformative technology. Generative AI is poised to revolutionize the M&A landscape, empowering participants to streamline processes and derive insights more swiftly.

According to Suzanne Kumar, an executive vice president at Bain, the early adopters of generative AI will gain a competitive edge. They will be able to uncover valuable insights faster than those who delay. The technology is expected to permeate the entire M&A process within the next five years, significantly enhancing efficiency from deal sourcing and market screening to integration planning post-acquisition.

Industry-Specific Insights

Bain's report further delves into sector-specific trends across various industries, mapping how they may respond to the future M&A landscape.

1. Consumer Products: Despite seeing substantial acquisitions, the sector faced a 19% drop in deal value in 2024, with executives primarily focusing on divesting non-core business components.
2. Energy and Natural Resources: The industry witnessed extensive consolidation, particularly among oil and gas companies, resulting in over $400 billion in deals last year—marking a three-year peak.
3. Financial Services: With changing customer expectations and technological advancements, the total deal value surged to $309 billion in 2024, led by banking and payment sectors.
4. Media and Entertainment: The consolidation trend is driven by major tech players entering the media space, prompting traditional firms to scale up rapidly to maintain competitiveness.
5. Retail: In spite of tightened regulations, retail M&A experienced a revival, bolstered by strong expectations for sustained deal-making activity in the coming year.

As 2025 approaches, the M&A market is set on a path that promises greater dynamism and opportunity. With a confluence of easing headwinds, technological advancements, and strategic recalibrations, the landscape may offer businesses the chance to capitalise on the evolving economic and regulatory climate.