Will this be the year that M&A bounces back? In 2024, according to Bain, the level of M&A activity was $3.5 trillion, roughly equivalent to the mid-2010s. Several factors accounted for the market’s sluggish growth, including:
Could 2025 be a year of rebounded M&A activity? Here are five of our predictions for the M&A market.
In recent years, firms have increasingly prioritised Environmental, Social and Governance (ESG). Since the pandemic, investors have increasingly focused on inclusive capitalism, which promotes equitable and sustainable growth that serves society’s needs. Companies that perform well on ESG metrics are better positioned for long-term and uncertain economic conditions.
In 2025, ESG could drive more deals as the hierarchy of funds based on ESG criteria changes. For example, when UBS and Credit Suisse merged, UBS’s green assets grew to $177 billion (making it second only to BlackRock).
However, mindfully implemented ESG represents more than an investment and acquisition checkbox. A recent example of ESG gone right includes when asset management firms like BlackRock and Fidelity leveraged their significant stakes in pharmaceutical companies to encourage collaboration for developing a COVID-19 vaccine.
This year, we hope to see ESG activity in M&A that marries altruistic concern and financial benefits for M&A firms and clients alike.
Bain notes that ‘the best companies [in 2024] learned to thoughtfully adapt their M&A strategies and processes to get out ahead of any potential macroeconomic or political situation’.
A thorough M&A strategy will ensure that firms are not caught off guard by the impacts of unknown geopolitical relations or inflationary pressures. What strategic approaches could firms adopt, exactly? They could commit to the following (and more) in 2025 and beyond:
Plus, as AI continues reshaping or ‘augmenting’ job roles – according to EY – an agile approach means M&A professionals may need to adapt their skillsets quickly.
In other words, it is not enough for M&A firms to be reactive. They must actively anticipate the challenges of an increasingly complex global environment.
Technology’s role as a strategic asset and a competitive differentiator ensured that some of the biggest M&A deals in 2024 focused on technology acquisitions. Examples of these deals include Cisco Systems’ $28 billion acquisition of Splunk and SAP’s $1.5 deal to buy WalkMe). This trend appears poised to continue into 2025.
But, regarding adopting technology within M&A, the hype around AI seems only to have culminated in a limited number of AI tools. As we noted in a previous article, there’s not a wealth of AI-powered M&A technologies currently on the market – which might change at some point this year.
As an M&A technology provider, we spent 2024 developing Financial Statements AI: a tool for reading and extracting data from financial statements. Using a tool like Financial Statements AI will allow companies to enhance their processes without moving their data onto an AI-powered system. However, some companies like Langcliffe International may spend their time and resources building (their own) AI systems.
Langcliffe International is Europe's leading buy-side deal originator. Maintaining proprietary deal data in their database was a priority – until they realised they weren’t leveraging the data’s full potential.
Last year, Langcliffe trained AI agents (i.e. programs that complete tasks on behalf of a user by utilising available tools). By using and adapting OpenAI’s ChatGPT technology with a specialist consultant, they enrich their deal data with AI-conducted research, including in-depth insights into potential buyers.
Langcliffe is optimistic about the impact of their AI-powered data management: “I would hope that within two years, we're twice the size, but with the AI aspects of what we're doing, we may not even need any new people”, suggested Mark Eardley, Langcliffe’s CEO.
Read our full interview with Langcliffe International here.
Donald Trump’s re-election in November 2024 as President of the United States shocked some. Some publications heralded Trump’s second presidency as the boost that M&A needed: ‘Trump bump: Dealmakers hopeful of M&A surge’ was a particularly evocative headline published on Ion Analytics.
Yet rejoicers may not recall that Trump’s first administration had a mixed effect on M&A. Despite expectations of a pro-business approach, his first administration maintained robust antitrust enforcement. Between fiscal years 2017 and 2019, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) brought 118 M&A challenges – comparable to previous administrations.
Accordingly, some reports about the Trump administration’s impact on M&A have been mixed in tone. ‘M&A Has Been Stuck for Years. Trump’s Return Could Change That’, declared Investopedia, while The Register’s coverage was more pessimistic, ‘Don’t expect massive M&A changes, say experts’.
The concerns of the tech elite under Joe Biden’s regime of antitrust enforcement – alongside Trump’s allyship with the tech elite this election – may see a president more likely to loosen the reins of regulatory scrutiny. In this instance, we might expect a faster revenue growth rate for some tech companies in M&A scenarios.
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Ultimately, is it fair to be optimistic about the state of M&A in 2025? Firms like Goldman Sachs and JP Morgan have put their cards on the table for the market to gain momentum in 2025. Both firms, among others, have stated that they expect the M&A market to increase the volume of deals and accelerate deal-making activity.
In particular, EY has predicted that deal volume will grow by 10% in the U.S. They cite, among other factors, loosened regulations under the Trump administration and AI adoption as drivers for the surge in deal volume.
‘Cautious optimism’ might be the phrase to employ while reviewing the evidence indicating M&A’s outlook in 2025. Yet, the M&A’s industry growth is not guaranteed, and certain factors preventing growth are unlikely to change (e.g. the impact of global conflict or inflationary pressures).
At Evolution AI, we’d like to see the M&A industry grow, empowered by strategic AI adoption and mindful approaches to ESG.
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