The global M&A engine is roaring, fueled by megadeals and rate-cut bets
Mergers-and-acquisitions activity globally is roaring back to life, with several megadeals in the third quarter building on momentum from earlier this year. When Donald Trump returned to the White House, markets expected a deregulatory wave and tax-friendly environment to spark a dealmaking surge. However, recession fears, geopolitical flashpoints and tariffs concerns kept boardrooms a bit cautious. Now, they appear to have put aside those worries for good, leading to a sharp surge in M & As, buoyed by rate-cut expectations and elevated levels of private-equity “dry powder.” According to data provided by financial markets platform Dealogic, the third-quarter saw a surge in M & A activity this year with collective deal value at $1.29 trillion, compared to $1.06 trillion in the second quarter and $1.1 trillion in the first quarter. The first six months witnessed smaller, mid-market deals, while the third quarter saw the return of big-ticket transactions. “After a turbulent spring, a surge in megadeals and a growing appetite for strategic repositioning boosted M & A activity in the third quarter, giving dealmakers hope of a strong finish to 2025,” M & A intelligence firm Mergermarket said in a recent report. The nine-month global deal value stood at over $3.4 trillion — a 32% year-on-year jump and the strongest showing since 2021, according to Mergermarket. Megadeals valued at $10 billion or more drove the surge, with 49 such transactions announced thus far this year, the highest on record for nine months, according to the firm’s data. The third quarter featured two marquee moments for the global M & A landscape: Union Pacific’s $85 billion acquisition of Norfolk Southern announced in July, and the more recent Electronic Arts’ $55 billion take-private deal by Public Investment Fund of Saudi Arabia, Silver Lake and Affinity Partners — the largest leveraged buyout in history. “The key difference now is that leaders have shifted from a ‘wait-and-see mode’ to ‘action mode,'” said EY-Parthenon Americas’ Vice Chair Mitch Berlin. “They’ve accepted high geopolitical and trade uncertainty is the new normal, and they’re looking [at] their next cycle of growth,” he told CNBC. There definitely is pent up demand for mergers and acquisitions as well as divestitures. Mercer Jeff Black According to EY-Parthenon , 48% of the CEOs it surveyed in August are planning more deals, showing sustained commitment to further acquisitions. Initial public offerings saw volumes climb about 12% year on year as of the start of September, according to JPMorgan’s mid-year M & A outlook report, driven by strength in fintech and industrials sectors as well as renewed appetite for marquee tech listings. Jefferies Financial Group posted its third best quarterly advisory fees recently, signaling that Wall Street’s investment banking engines are running hot again. Investment banking behemoths such as JPMorgan have not posted their third-quarter results, but JPM co-CEO of commercial and investment bank Doug Petno expects investment banking revenue to grow a low double-digit percentage . “There definitely is pent up demand for mergers and acquisitions as well as divestitures,” said Jeff Black, who leads Mercer’s global M & A advisory practice. “We are also seeing more stakeholder pressure on public companies to grow. This is triggering more divestitures,” he added. Lucinda Guthrie, head of Mergermarket, pointed to structural tailwinds such as lighter-touch regulation, record private-equity uninvested capital or dry powder, and a backlog of exits. According to management consulting firm Bain, the global PE industry is currently sitting on $1.2 trillion in uninvested funds. “There’s been a rush for AI-linked assets — data, infrastructure and talent — while traditional industries divest non-core assets to pivot to the new environment,” she said. Not a 2021 easy-money rerun Market watchers told CNBC that the U.S. Federal Reserve’s September cut gave companies the confidence that financing costs may have peaked. Last month, the Fed approved a widely anticipated rate cut and signaled that two more were on the way before the end of the year Lower financing costs make it cheaper for companies to borrow money to fund acquisitions or leveraged buyouts. When the Federal Reserve signals that rates have likely peaked, that clarity makes it easier to price deals, plan financing structures and move forward with M & A transactions. The dealmaking boom that’s unfolding, however, is not a rerun of 2021’s easy-money frenzy: Guthrie noted that small- and mid-cap M & A activity remains sluggish, hampered by valuation gaps and an exit environment that is especially tougher for the smaller players more exposed to policy volatility under the Trump administration While financing expenses are expected to come down, for now sponsors are still grappling with elevated costs, while seller expectations are anchored in 2021 valuations, Mergermarket’s insights team said. To navigate these headwinds, sponsors and corporates are employing more creative deal structures including joint ventures with buyout options and continuation vehicles amongst other methods, Mergermarket said. A continuation vehicle is an investment fund that a PE firm creates to buy one or more portfolio companies from a fund nearing the end of its lifecycle, allowing it to hold those assets for longer. “Top-tier private equity funds are active and raising capital, but mid-market funds face exit and fundraising challenges,” said Mercer’s Black.
