Global M&A industry trends

We began 2025 feeling cautiously optimistic about an uptick in M&A over the course of the year but also warned of some wild cards that could spoil the party. Those cards turned out to be a lot wilder than even we had imagined: financial markets have been bouncing up and down like a yo-yo on the daily news flow out of Washington DC, where talk of tariffs has been louder—and action on deregulation has been slower—than expected. Meanwhile, regional conflicts are heating up and long-term interest rates in the US and Europe have defied expectations. 

For all the surprises, deals are getting done—and dealmakers are finding ways to navigate through the uncertainties that prevail in today’s M&A market. M&A volumes globally continue to decline: they dropped by 9% in the first half of 2025 compared with the first half of 2024, while deal values are up 15%. We continue to see transactions in companies with a local focus within national borders, as well as in service companies or others less susceptible to tariffs. Great companies with strong cash flow and healthy prospects in any territory or sector are still being bought and sold. However, the market has not been kind to the many companies falling outside these parameters. In the US, for example, a PwC Pulse Survey from May 2025 showed that, in response to the tariff uncertainty, 30% of companies had paused or revisited deals. We expect dealmakers to feel the continued fallout over the coming months.

M&A isn’t going away, though. It’s a fundamental part of corporate culture and the lifeblood of the private equity (PE) world. Indeed, that same PwC Pulse Survey shows that 51% of US companies are still pursuing deals—a clear sign that transformation and business model reinvention remain a top priority. It’s a reflection of the new era we have entered, one in which artificial intelligence (AI) and new competitive dynamics are reshaping the corporate landscape, with AI a catalyst for industry disruption and change. As this new generation of technologies takes hold, it’s likely to spark more deal activity. 

In this context, dealmakers across the globe are understandably asking, ‘What’s the best course of action to follow?’

High stakes, hard choices

In today’s M&A market with such complex and sometimes contradictory trends, dealmakers are having to figure out their next move. The new realities they face include the following:

Uncertainty may be the new constant. Over the past five years, the M&A market has been defined by near-constant change. The initial shock of the COVID-19 pandemic brought dealmaking to a standstill, followed by a sharp rebound and record levels of activity. Since then, however, with higher interest rates and shifting geopolitical and regulatory environments, the pendulum has swung back towards caution. Today’s more complex and unpredictable market presents dealmakers with a far less forgiving backdrop. The result is an M&A environment in which elevated levels of uncertainty are not only pervasive but also structural. For dealmakers, progress starts with accepting that uncertainty is likely to be the new permanent state, which means that they will need to find ways to continuously plan and prepare for it rather than waiting for it to pass.

Capital allocation is facing a new set of trade-offs. Capital is no longer freely flowing—and nowhere is that more apparent than in the growing tug-of-war between M&A and AI investment. Big Tech companies, including Microsoft and Meta, have announced plans to collectively spend hundreds of billions of dollars this year alone to build out AI infrastructure, talent and capability development. This is sparking a super cycle of capital spending, which points towards multi-trillion-dollar global investments over the next five years. The tech spending is not just on AI. Rather, we are in a time of rapid technological ferment in all sectors that is forcing CEOs, boards and dealmakers to make tougher decisions about capital allocation. For some, that means fewer or smaller deals. For others, it means using partnerships, minority stakes, or carve-outs to pursue strategic goals while preserving balance sheet strength. Capital discipline today is about making deliberate and measured choices. Organic or inorganic growth? How much to spend on tech? And on AI? It all combines to make capital allocation one of the most important and daunting decisions for executives today.

AI’s innovation potential will bring disruption and M&A opportunities. The rapid advance of new AI technologies has jolted the corporate world into a new phase of high-stakes transformation. For acquirers, this presents both risk and opportunity: the risk of acquiring a business on the brink of disruption and the opportunity to harness new technologies to innovate and gain a competitive edge. The M&A market is increasingly reflecting this divide, with rising demand for capability-driven deals, such as Google’s proposed $32bn acquisition of Wiz, and a reassessment of traditional assets through an AI lens. The next six to 12 months will be critical for leaders to reposition their companies for the next wave of innovation. The investment in digital infrastructure and energy to support the growth in AI has already started, and companies across industries are rapidly developing AI agents to enhance productivity, reduce costs and unlock new revenue opportunities. Yet making the most of this new tech wave is difficult and expensive. Companies working to embed AI in their business and operating models face challenges ranging from execution risk to cultural resistance. Nonetheless, as our latest CEO Survey revealed, the cost of inaction is far greater: 40% of CEOs say their companies won’t survive the next decade if they don’t chart a new path. 

The data on global M&A transactions across all sectors in the first half of 2025 reflects this tension between understandable caution in the face of greater uncertainty and, at the same time, urgency about moving forward with transformation plans. If the current pace of dealmaking continues, total deal volume for 2025 may fall below 45,000—the lowest level in more than a decade. At the same time, the rise in deal values signals a trend towards larger transactions: the number of deals greater than $1bn in value is up 19% since the same time last year, while those greater than $5bn in value are up 16%. The technology sector continues to see the most M&A activity, but deal activity is widespread across sectors. And while overall deal activity remains subdued in most countries, there are exceptions—for instance, India and the Middle East, where deal volumes increased by 18% and 13%, respectively. 

We won’t rerun the now familiar details of the on-again, off-again tariffs or the other policy uncertainties which continue to weigh on financial markets and, by extension, the M&A climate. Nor will we attempt to predict what will happen next, particularly amid heightened geopolitical tensions. But beyond trade policy announcements and an increasingly volatile global backdrop, dealmakers do need to keep their eye on several critical issues:

Interest rates continue to defy gravity. Long-term interest rates remain stubbornly high. Central banks in Europe have reduced their benchmark lending rates on the back of slowing growth and declining inflation, but bond market rates have not fully followed suit. In the US, long-term rates have continued to rise. Lending rates have long been one of the two key factors influencing M&A activity—the other being valuations. If the US and European economies cool and interest rates fall, that could potentially provide impetus to M&A markets. However, concerns about rising deficit spending, among other issues, are hitting market rates, and the uncertain outlook is an important underlying factor in the caution we are now seeing among dealmakers. Dealmakers should analyse financing options, particularly with the growth of private credit, to ensure they are optimising the capital structures of their deals.

Government debt: The economic choker people are waking up to. This second issue relates to the first because deficit spending by governments in many countries has contributed to a significant increase in debt burden. Government debt in OECD countries is expected to rise to $59tn in 2025, or 85% of GDP—a debt-to-GDP ratio that is almost double the level in 2007, before the global financial crisis. Interest payments on government debt in the OECD are now greater than government expenditure on defence in aggregate. This increase in government debt raises important concerns for dealmakers and the M&A market. First, it may create long-term fiscal uncertainty and reduce business confidence. Second, it puts upward pressure on interest rates, which increases the cost of financing deals. And third, higher levels of public debt start to strangle economic growth, putting pressure on corporate earnings, reducing valuations and dampening investor appetite for M&A. Dealmakers should model growth and financing sensitivities in their valuation models.

Private equity exits have stalled. The third issue to watch is how well PE players manage to reduce the backlog of portfolio companies on their books so that they can return money to investors and have an easier time raising new funds. That backlog has continued to grow, with the number of portfolio companies exceeding 30,000 by the end of March 2025—47% of which have been on the books since 2020. The volume of exits will need to grow substantially to reduce that backlog, but the current environment is not propitious because the challenging environment and the weak IPO market have affected PE dealmaking—although a spate of recent public offerings indicates the market may be turning. The volume of PE exits in the first quarter of this year increased by 83 deals to 903 (up from 820), but this number needs to be significantly higher if it’s to reverse the trend of ever more portfolio companies continuing to age. The issue is a significant one for M&A more broadly because PE funds have played an increasingly large role in mergers and acquisitions of all types and are aggressively growing private credit. PE players have shown ingenuity in developing a secondary market for portfolio companies, including through continuation funds, which allow some investors to cash out while others can stay in but which potentially leaves the portfolio companies on their books in some form.

From the third quarter of 2023 through the end of 2024, multiples of financial value comparing enterprise value with EBITDA (earnings before interest, tax, depreciation, and amortisation) over the previous 12 months reversed the downward trend observed since the highs of the immediate post-COVID-19 period. With the exception of a slight decline in the second quarter of 2024, multiples steadily increased to reach a peak median of 14.3x in September 2024—the highest monthly figure since September 2021. However, ongoing economic uncertainty, including heightened concerns about potential tariffs, as well as persistently high financing costs, have put downward pressure on valuations once again in 2025. As a result, median global multiples have fallen back to 10.8x, approximately 14% lower than the levels seen in the fourth quarter of 2024. 

A closer look at valuations in major markets highlights a geographic divergence: while median multiples in the US have risen in the first half of 2025 relative to the fourth quarter of 2024, they have declined in Europe and Asia Pacific. At the same time, stock indices across these markets have largely moved in tandem. Dealmakers may be signalling a bet that US companies will weather a tariff war more favourably. 

Observed control premiums—that is, the additional amount a buyer is willing to pay to gain control of a target company—have generally moved inversely with multiples. This indicates dealmakers are maintaining some discipline with intrinsic value and not over- or underreacting to market volatility.

In the two-year period from 2020 to 2022, observed multiples in deals valued at more than $1bn were about 25% higher than the observed multiples for ‘all deals’. Larger companies were considered better positioned to withstand the systemic shock from COVID-19, and such companies had steeper growth recovery curves and were seen as benefitting from a lower cost of debt. Since 2023, the gap between larger deals and the ‘all deals’ group of observed transactions has largely disappeared: median multiples for transactions greater than $1bn in value were, on average, about 2% more than ‘all deals’. Median large-deal multiples in the second quarter of 2025 are 37% below their peak in the third quarter of 2021. By contrast, the median ‘all deals’ multiples in the second quarter of 2025 are only 17% below their peak in the second quarter of 2021. 

Control premiums in large deals have been stable at approximately 30% throughout the historical period. This implies that the recent decline in multiples in the second quarter of 2025 reflects a decline in pricing for larger companies. This decline may be a function of greater exposure to tariff risk, with larger companies tending to have more cross-border business. These larger companies may also have lower forward growth expectations than in the immediate post-COVID-19 period. 

Given the elevated level of uncertainty at present, dealmakers will need to take care when pricing deals to consider a range of upside and downside scenarios. At the margin, scenarios that may have seemed highly unlikely in the past may now have material probabilities associated with them. Model inputs, especially variables affected by potential tariffs, should be carefully vetted. In the second half of 2025, if monetary policy eases and geopolitical tensions diminish, we may see a moderate recovery in deal pricing.

Deal values increased 15% between the first half of 2024 and the first half of 2025, whereas deal volumes decreased 9% over the same period. While inherently riskier due to their size—and thus harder to pull off even in the best of times—we saw 36 megadeals announced in the first five months of the year, compared with 31 in the prior year period. Regional trends varied:

• In Asia Pacific, deal values grew 14%, with deal volumes down 8%. India’s deal volumes increased 18%. While India’s market activity remained healthy, it skewed towards mid-market or private transactions, contributing to a decline in deal values despite the uptick in activity. In Japan, the opposite trend was observed, with deal volumes down 13% but deal values increasing 175% due to two megadeals announced in the first half of 2025.

• In Europe, the Middle East and Africa (EMEA), deal volumes and values declined 6% and 7%, respectively. The decline in deal values was primarily because of a drop in the number of megadeals in the UK compared with the prior year. 

• In the Americas, deal volumes declined 12% but values grew 26%, primarily because of the increase in deals valued greater than $1bn. More than half of such deals were in the US.

The effects of tariffs, policy shifts and regulatory uncertainty are playing out unevenly across sectors. Between the first half of 2024 and the first half of 2025, aerospace and defence, chemicals, asset and wealth management, and power and utilities have all seen growth in deal volumes and values. In contrast, retail and consumer, pharmaceuticals, automotive and industrials have experienced declines on both fronts, underscoring how sector-specific dynamics are shaping deal activity. 

Tariff vulnerability is one factor that differentiates sectors, but it’s not the only one. Automotive, manufacturing and pharma are among the sectors most exposed to rising trade barriers, leading to a decline in M&A activity. Pharma, once a consistent M&A outperformer, is now facing a trifecta of challenges—from US drug pricing reform proposals, regulatory uncertainty and cross-border tariffs. These are creating a more cautious environment for transactions. On the flip side, defence is attracting new-found investor interest, buoyed by higher security budgets in Europe and elsewhere. Meanwhile, service-oriented sectors (such as IT services in technology, professional services in business services, and service providers in asset management) are trading at higher multiples. Their asset-light models, sustainable cash flows and growth prospects are supporting both deal volumes and higher elevated valuations.

While large deals are still occurring across a wide range of sectors, megadeal activity has been especially concentrated in technology, banking and capital markets, and power and utilities. This trend is reflected in the top three deals announced in the first half of 2025, each from a different sector: Google’s $32bn proposed acquisition of Wiz in tech; Constellation Energy’s $26.6bn proposed acquisition of Calpine in energy; and Global Payments’ $24.25bn proposed acquisition of Worldpay in banking and capital markets.

Deal flow into the Americas gains ground amid regional refocus

As a dealmaker in the current uncertain geopolitical environment, a key question to consider is whether to focus your M&A sights on domestic or intra-regional plays, which may be less risky than pursuing more complex cross-border deals. 

The chart below breaks down investment flows by buyer region (Americas, Asia Pacific and EMEA) and destination region, offering insights into where capital is being deployed, both domestically and internationally. Despite tariff uncertainty, capital flows for deals still appear to be pointing in favour of the US.

Between the first half of 2024 and the first half of 2025, total global deal values increased from $1.3tn to $1.5tn, marking a 15% year-over-year increase. During the first half of 2025, cross-border deal activity increased. The flow of deals involving EMEA or Asia Pacific acquirers transacting in the Americas is growing, while dealmakers based in the Americas are increasingly focusing on domestic or intra-regional transactions.

The Americas led global M&A with $908bn in deal value in the first half of 2025 (61% of the total), up from $722bn (55%) the year prior. To determine whether stronger domestic activity or increased inbound investment from Asia Pacific and EMEA are driving this increase, we analysed deal flows across the three regions.

Americas-based buyers increased investment by 16%, from $714bn in the first half of 2024 to $830bn in the first half of 2025. Notably, 91% of this capital stayed within the region, up from 86% the previous year, suggesting a stronger domestic focus.

Asia Pacific buyers expanded investment within their own region in absolute terms but more than doubled their investment into the Americas. In the first half of 2025, the Americas represented 22% of their total deal value, up from 11% the year prior.

EMEA buyers saw a slight 3% decline in total deal value year-over-year, but they increased spending in both the Americas and Asia Pacific, reallocating capital towards higher-growth or more accessible markets.

These shifts suggest that the most sought-after assets may increasingly be located in the Americas, particularly in the US. Furthermore, the recent announcements of billions—if not trillions—of dollars of investment in the US, from both US companies and international players, may support the narrative of ‘American preeminence’. However, recent tariff moves and other US policy changes are starting to temper enthusiasm. While hard data on the impact is not yet available, anecdotal evidence indicates rising caution among investors. Many dealmakers now express greater confidence in executing local or regional deals over more complex cross-border transactions, hinting at a possible shift in momentum.

We are already seeing some significant patterns developing in the M&A market this year as dealmakers try to make sense of—and look beyond—the uncertainties. As always, the big question they face is how to prioritise growth in the current environment, not just in the face of the geopolitical ups and downs but also given the macroeconomic environment, with decelerating global economic growth and heightened regional conflicts. To that end, here is a non-exhaustive list of what we believe are winning strategies for these difficult times.

Flight to quality. High-quality companies continue to attract interest. Indeed, auctions in some cases are more competitive than before, fetching higher prices and better valuations—and even preemptive bids. This interest in the cream of the crop partially explains the broader trend we are seeing of higher M&A values even as volumes decline. The companies being sought after cut across all sectors and have a consistent track record, strong management and a well-supported growth plan. Their market valuation may be steep, but their prospects support it. On the other hand, lower-quality assets continue to struggle to attract interest, and we are seeing that sale processes for such companies are being extended and sometimes ended. 

The importance of geography. Dealmakers are taking a more nuanced view of geography than ever before, including assessing each link in their supply chains to identify dependencies and risks. In doing so, they are looking to make themselves more resilient and more resistant to tariffs and the more volatile geopolitical backdrop. The questions this raises are complicated ones. Among them, by way of example: do you focus on the rest of the world and seek to ringfence or bypass the US? Do you focus on the US and look beyond China?

Stay thematically anchored. Thematic investing offers dealmakers a strategic anchor. Rather than reacting to short-term volatility, boards and investment committees should focus on long-term structural trends, such as technological disruption, climate change, demographic shifts, supply chain resilience or others. Building a clear business case around sector and subsector themes helps lay the groundwork for decisive action when opportunities arise. Even if the market timing is difficult, articulating why specific assets, sectors or themes will matter over the next five to ten years can align stakeholders early and ensure readiness when valuation and other conditions converge. This forward-looking approach sharpens the focus on value creation beyond current market volatility.

Our recent research around how AI, climate change and other megatrends shift value pools, reconfigure industries and redefine the top management agenda is a helpful framework for leaders as they consider where value is today and where it is moving to over the next decade and as they help shape a thematic investing approach.

Strengthen scenario planning. In today’s volatile environment, scenario planning must go beyond surface-level stress testing. Dealmakers should systematically map out a range of outcomes—macroeconomic, regulatory and geopolitical—to understand how different variables could affect the target’s performance and valuation. This means modelling both best- and worst-case scenarios and identifying the key levers that would affect outcomes such as growth rates, supply chain shifts, tariff exposure and fluctuations in exchange rates. Companies in tariff-sensitive sectors such as pharmaceuticals and automotive are already embedding these assumptions into cost models to make faster, more confident decisions. A thoughtful scenario framework helps dealmakers prepare and move forward, shifting the focus from uncertainty to opportunity.

Prioritise value creation from day one, with zero margin for error. In today’s high-stakes environment, the margin for error has all but disappeared. Dealmakers are rewarded not only for identifying potential but also for realising it through disciplined, detail-oriented execution. That starts with a clear, actionable value creation plan developed early in the process. Critical questions need to be addressed up front: Where will commercial excellence come from? What are the levers for productivity improvement? What integration challenges could derail value capture? Success increasingly hinges on answering these questions early and executing on them with precision. Whether the goal is margin expansion, top-line growth or portfolio reshaping, value drivers must be explicit, realistic and integrated into due diligence, deal negotiations and integration planning. Ultimately, a deal will succeed or not depending on whether the dealmaker is able to get these details right—and to do so in an environment that no longer tolerates missteps.

Maintain execution discipline, but stay agile. Surprises happen—and at the moment, they’re happening a lot. In today’s environment, uncertainty is the norm, not the exception. Tariffs, regulation, geopolitical shocks and macroeconomic shifts are all creating conditions in which the unexpected is now expected. That makes execution discipline more important than ever. This includes sticking to investment principles, avoiding overreach on valuations and ensuring post-deal integration capabilities are in place before signing. At the same time, discipline alone isn’t enough. Dealmakers must also embed organisational agility into the deal process—both pre- and post-close. That means cultivating a new mindset that can pivot quickly, question assumptions and adapt when the landscape shifts. Agility isn’t just about reacting faster—it’s about being prepared to respond when things don’t go according to plan. 

The French 19th century writer and journalist Jean-Baptiste Alphonse Karr is mainly remembered today for his pithy quote ‘Plus ça change, plus c’est la même chose’ (‘The more things change, the more they stay the same’). Karr was writing about the politics of France’s Second Republic, but he could just as well have been talking about today’s M&A market. Uncertainty has been the watchword for the past several years, first with the direction of interest rates after the pandemic, then with inflation, and now with the direction of economic growth, trade policy and geopolitical instability. We have merely exchanged one uncertainty for another. Clarity would be welcome, but dealmakers need to learn to live without it. Capital allocation, strategy and leveraging AI in execution are essential. Deals are being done in this market, including many large deals. And they will continue to be done. This is the time for dealmakers to be bold, find the right path forward and then stick to it—whatever the day’s news brings.

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