The outlook for global deal-making
Goldman Sachs Exchanges
Deep Dive
What factors contributed to the 10% increase in M&A activity in 2024 compared to 2023?
The 10% increase in M&A activity in 2024 was driven by several factors, including moderating inflation, the start of the Fed's rate-cutting cycle, and record highs in the S&P 500. Strategic repositioning post-COVID, lower interest rates reducing financing costs, and pressure on financial sponsors to return liquidity to their LPs also played significant roles. Europe, in particular, saw a strong recovery in deal activity after a muted 2023.
How has the rate environment impacted corporate dealmaking in 2024?
The rate environment in 2024, with the Fed cutting rates, has modestly improved dealmaking conditions. However, absolute rates remain higher than the near-zero levels post-financial crisis, requiring psychological adjustment. Corporates and financial sponsors have adapted to this 'new normal,' with valuations and financing costs stabilizing, which has supported M&A activity.
What industries are expected to see the most deal activity in 2025?
In 2025, deal activity is expected to be concentrated in consumer, healthcare, and technology sectors. Consumer companies are looking to add brands and businesses, while healthcare firms are acquiring smaller companies with innovative technologies. Large tech companies are also expected to continue acquiring smaller firms with strong software or AI capabilities. The theme of scale—geographic, product, and financial—remains a key driver across industries.
How has Europe's M&A activity evolved in 2024 compared to 2023?
Europe's M&A activity in 2024 saw a sharp acceleration after a muted 2023. Deal activity normalized rapidly, particularly in financial institutions, with both domestic and cross-border transactions. Private equity activity also surged, especially in public-to-private deals, reflecting a recovery in confidence and market conditions.
What role does generative AI play in shaping M&A activity in 2025?
Generative AI is a significant theme influencing M&A activity in 2025, impacting industries like semiconductors, technology, real estate, and energy. Companies are exploring partnerships, investments, and potential acquisitions to secure AI capabilities and infrastructure, such as data centers and power generation. While initial activity may focus on investments and partnerships, M&A is expected to grow as AI companies mature and valuations become clearer.
What are the key risks that could derail M&A activity in 2025?
Key risks to M&A activity in 2025 include geopolitical disturbances, regulatory changes, and black swan events like another pandemic. While long-term strategic decisions remain robust, short-term disruptions from elections, tariffs, or conflicts could temper dealmaking. However, underlying forces like interest rates, growth needs, and the pursuit of scale are expected to sustain activity.
How has private equity activity evolved in 2024, and what is the outlook for 2025?
Private equity activity in 2024 saw a rapid increase in capital deployment, nearing long-term averages, driven by public-to-private deals. However, exits remain below historical levels due to valuation gaps and a subdued IPO market. In 2025, improved IPO conditions and closing bid-ask spreads are expected to spur more exits, driving further private equity activity.