From an M&A perspective, boards should look forward to 2025 with cautious optimism. Despite uncertainties over geopolitical crises and details of the new US administration’s policies on trade and regulation, there are sufficiently positive global economic indicators that point to a rise in M&A deal activity.

This year is likely to see the return of the mega-deal, the reignition of private equity, escalating impacts from AI, and a post-deregulation boom, triggered by the new US administration.

Economy

The positive outlook results from a combination of hard economic conditions and softer elements of sentiment in the market. Inflation is reducing, interest rates are on a downward trajectory, and there are prospects for economic growth in the world’s most significant economies that will improve company valuations.

These economic factors feed confidence in making deal decisions, which we anticipate will be enhanced by reductions in the uncertainties that have inhibited markets for several years.

Those uncertainties have included the shock of conflicts in Ukraine and the Middle East, as well as a wait-and-see approach to various elections around the world. Cross-border M&A is expected to rise, particularly between the US, Europe and Asia, and this is likely to affect certain globalised industries, such as energy, natural resources, infrastructure and technology.

Such multi-jurisdictional deals tend to be larger in scale, so we also anticipate the return of the large-cap deal ($5bn+), as the availability of capital and rising stock markets make such bids more feasible. There is also likely to be a growth in take-privates, with private equity houses returning to dealmaking.

The return of private equity

The steady growth of private equity in recent decades, and its role in creating value and making new markets, looks set to continue into 2025, with portfolio liquidity front and centre of minds.

The coming year is likely to see a wave of carve-outs, exits and IPOs having a knock-on effect on the market prompting more confidence and private equity investment and activity. One specific development we foresee is more partnerships/joint ventures between strategics and private capital providers.

Growth markets

Two sectors in particular may see higher levels of deal activity. The first is energy transition, as government sponsoring of green technology creates value and new markets.

The second is artificial intelligence (AI) which—as it develops and disrupts—is likely to drive market consolidation, acquisitions and bolt-ons. Companies may seek to integrate AI capabilities into their portfolios, prompting more M&A activity, especially in areas such as automation, cloud computing and cybersecurity.

Additional impacts that AI will have on deal-making, regardless of the volume, are heightened risks associated with acquiring AI companies in the context of uncertain liabilities, and the potential impact of AI processes on dealmaking, including in pre-deal due diligence and post-deal integration. It is still very challenging to value AI companies with the market and AI regulation moving so quickly, but it may be that 2025 is the year where the market consolidates, and the value of AI companies becomes clearer.

The bigger picture

While some forms of disruption catalyse change, other types of disruption have inhibited confidence and negatively affected deal-making. Market confidence has suffered in recent years from post-pandemic geopolitical crises, mainly from conflicts in Ukraine and the Middle East. Whilst far from over, the shock factors from these situations are abating and any reduction in political volatility will only help investor confidence.

There remains some uncertainty over the incoming US administration’s approach to various policies, and as these clarify during 2025, it may significantly boost activity. One major area of concern is tariffs, and especially the US/China trade relationship, and—however that pans out—investors are hoping that the economic ties between America and Asia remain strong.

The regulatory angle

Another uncertainty for investors is the new administration’s approach to regulation. If the US government reduces regulation, which it has indicated that it will, this is likely to catalyse more transactions involving Europe. Intensely regulated industries, such as finance and pharmaceuticals, may see growing appetites for deals, as may sectors where merger control oversight may loosen.

The tech industry in particular has come under close regulatory scrutiny, for example in relation to national security, where minority investments as low as 10% may be subject to review. AI is a particular focus of regulators across the globe. Other focuses for regulators include private equity strategies to ‘buy and build’ and foreign direct investment.

Activism reignited

M&A may also be impacted by the growing influence of shareholder activism. The past year was a second consecutive year of record-setting campaign activity, led by the US and Asia, and such energetic activism is expected to continue into 2025. Board change is usually the primary activist objective but, over recent months, M&A has emerged as a very prominent campaign objective.

Corporates are preparing for a busy year, and one that also promises to be exciting for boards in terms of tech transformations and the growing complexities of both the public and private markets.

David Avery-Gee is co-managing partner of Weil’s London office and Jenine Hulsmann is a partner at Weil