Following a promising begin to 2025, hopes of a resurgence in M&A exercise this 12 months had been dashed early within the second quarter with the U.S. administration’s abrupt announcement of broad tariffs, marking a serious escalation in international commerce tensions. Nonetheless, in response to Norton Rose Fulbright and Mergermarket’s newest international M&A developments and dangers report, the survey of 200 of essentially the most senior main executives reveals that, regardless of the uncertainty, practically one-third of respondents say that their M&A urge for food has both stayed the identical and even elevated considerably.
The report highlights indicators of cautious optimism noting that non-public fairness is able to put dry powder to work and that this difficult surroundings may lower competitors for engaging targets and doubtlessly decrease valuations. As sure areas in North America have develop into much less engaging amid market volatility, stronger M&A exercise is predicted in Europe, East Asia and Australia, highlighting regional variations in market sentiment.
Whereas the M&A outlook stays unsure, the survey reveals that dealmakers are responding with prudence, pragmatism and persistence as they put together to grab the alternatives that lie forward. Medium to long run prospects for dealmaking look constructive as difficult dynamics would require corporations to adapt and one a part of that can contain a vibrant M&A method.
M&A market faces setbacks as tariffs set off strategic reassessment and delays
The far-reaching reciprocal tariffs introduced by the US administration had a chilling impact on M&A globally. The transfer startled the market, with many M&A offers being postponed pending larger readability within the dealmaking surroundings. Some offers in progress stalled, whereas others have come to an entire halt as events reassess the implications of tariffs on their offers.
Our preliminary survey, performed previous to the April 2nd tariff announcement, mirrored a bullish sentiment, with 53 p.c of respondents anticipating their M&A urge for food to extend in 2025. In response to a follow-up question on the identical subject after the announcement, 67 p.c of respondents mentioned the tariff-related turbulence and escalation in commerce tensions prompted their urge for food for M&A to lower. Within the US, survey members responded that tariffs, new merchandise/providers, non-public fairness (PE) dry powder and provide chain disruption would be the 4 most vital drivers of M&A in 2025.
Amongst these nonetheless pursuing new M&A transactions, there’s a noticeable shift towards lower-risk acquisitions, reminiscent of home offers as a substitute of cross-border transactions and towards industries much less weak to tariff uncertainty, like know-how and healthcare transactions. Others see the turmoil as a chance to snap up a discount and seize engaging targets at a decrease valuation, as opponents retreat from doing offers. In the end, whereas tariffs current short-term challenges, many dealmakers are centered on long-term worth creation and have a positive outlook on M&A exercise.
Personal fairness able to put dry powder to work
The survey signifies that respondents consider that PE dry powder would be the second most vital driver of M&A exercise in 2025, as a worldwide baseline. In each area, aside from South and Southeast Asia, Africa and Latin America, respondents rank PE dry powder within the prime 4 most vital drivers of M&A exercise in 2025.
As well as, survey members anticipate home PE consumers to be among the many most energetic varieties of acquirers in deal markets in 2025 (cited by 44 p.c, taking our international baseline). Their presence can be felt throughout all markets, in response to our respondents, with a selected emphasis on South and Southeast Asia (49 p.c). Their worldwide PE friends, in the meantime, are anticipated to be particularly energetic in neighboring East Asia (41 p.c), in addition to Europe (additionally 41 p.c) and Australia and New Zealand (43 p.c).
Dealmakers transfer shortly to combine AI
AI has quickly advanced right into a transformative pressure inside the M&A panorama, concurrently creating extremely sought-after acquisition targets and equipping in-house deal groups with more and more resourceful instruments. In 2025, know-how associated enterprises started to supply a few of the most tasty deal alternatives, together with the next subsectors: cybersecurity, knowledge analytics and particularly AI. Over half of survey members (51 p.c) have acquired an AI enterprise, with respondents making use of the know-how to numerous components of their M&A processes, from deal sourcing to due diligence. Furthermore, 46 p.c report that they want to purchase an AI enterprise within the close to time period. Each of those figures converse to the speedy adoption of this transformative know-how in a brief time period. In our earlier 2024 examine, simply 33 p.c of respondents mentioned they had been seeking to purchase an AI enterprise.
Along with buying AI targets, corporations are deploying AI to bolster their very own in-house dealmaking processes. Roughly 77 p.c of respondents have responded that they’ve lately both partnered with AI distributors or procured providers from an AI supplier. AI know-how has develop into an important software for a lot of companies to assist their M&A processes. The know-how is presently being utilized in monetary evaluation and valuation modeling, together with being utilized in M&A documentations. And, roughly 63 p.c of respondents are utilizing AI to enhance M&A due diligence.
Reputation of deal insurance coverage set to soar
Representations and warranties insurance coverage (RWI), additionally known as guarantee and indemnity insurance coverage, continues to speed up as companies offset danger in an more and more unsure dealmaking surroundings. RWI is predicted to extend in 2025 in comparison with 2024 throughout all worldwide markets, as practically two-thirds of the respondents observe that they anticipate that RWI will improve this 12 months in all areas, together with 37 p.c who anticipate that improve to be vital (up from 26 p.c in our earlier examine). Notably, respondents anticipate that RWI can be used extra in offers involving industrial property, life sciences and healthcare, and know-how. With the maturity of the RWI market, M&A dealmakers can anticipate to see a worldwide improve in carriers that can seemingly make charges and phrases extra aggressive.
Learn the complete M&A developments and dangers report.
