Transaction Outlook 2025
By Bart de Volder; Global Transaction Advisory Services Leader
The global M&A landscape shows signs of varied recovery across different regions, shaped by factors such as inflation, interest rates, and valuation gaps. Insights from HLB's Annual Survey of Business Leaders 2025 reveal cautious optimism as they focus on strategic investments to adapt to evolving market dynamics.
While challenges persist, high-growth sectors like technology, healthcare, and renewable energy remain key drivers of deal activity.
Traditionally, our Annual Survey of Business Leaders aims to offer a closer look at the trends influencing M&A. In this edition, we focus on the key trends to impact M&A in 2025 and offer insights to help businesses seize emerging opportunities.
How will the M&A landscape unfold in 2025?
Regional trends vary, with countries like Australia, Brazil, China, and the US navigating distinct challenges and opportunities. While some markets show optimism for a recovery, others remain cautious, navigating macroeconomic pressures, geopolitical tensions, and sector-specific dynamics. Each region's approach to M&A in 2025 will depend on local factors, but global trends in technology, sustainability, and private equity will remain key drivers across the board.
Australia
In Australia, the outlook for the M&A landscape in 2025 appears optimistic, with many expecting it to outperform the subdued activity of 2024. Private equity (PE) is anticipated to play a significant role in this resurgence despite macroeconomic challenges such as persistent inflation and ongoing global geopolitical uncertainties. PE and venture capital firms (VC) are expected to leverage their growing capital reserves, seizing opportunities to acquire undervalued assets.
However, there remains uncertainty about the performance of public market transactions, which were notably quiet in 2024, apart from notable deals like the Chemist Warehouse RTO. It remains to be seen if this trend will shift in 2025.
In the resource industry, which holds a prominent position in the country's economy, the sentiment is leaning towards increased consolidation, especially in the gold and copper sectors, as well as in battery-related minerals—an area that continues to gain momentum due to the global push for renewable energy and sustainable technologies.
Brazil
Brazil's M&A market offers a mix of challenges and opportunities shaped by global and domestic factors. External influences, including global liquidity, Chinese demand, and US Federal Reserve policies, will significantly impact the landscape. However, these uncertainties are expected to ease in the first quarter 2025.
The country's high interest rates, with the potential for further increases, will likely keep capital costs elevated, restrict leveraged transactions, and temper aggressive deal-making. On the other hand, these factors can fuel distressed M&A opportunities as financially strained companies become targets for strategic acquisitions or restructuring.
While a standout year is unlikely, long-term investors with liquidity and strong execution strategies will find opportunities to create value. Success will depend on careful planning and adaptability to evolving global and local conditions.
Resilient sectors such as healthcare, technology, renewable energy, financial services, agribusiness, and consumer goods are expected to drive consolidation, fueled by the need for scale, efficiency, and market expansion.
China
M&A activity in China is expected to gain momentum in 2025. Following a period of market fluctuations, businesses will adopt a more proactive approach to mergers and acquisitions, aiming to drive growth, expand market share, and acquire cutting-edge technologies.
Horizontal and vertical integration will remain key strategies, enabling companies to optimise resource allocation, reduce costs, enhance synergies, and increase industry concentration. Businesses can strengthen their competitive positioning by acquiring firms within the same industry or along the upstream and downstream segments of the supply chain.
Government policies, such as the Nine Articles on the State and the Six Articles on Mergers and Acquisitions, have already played a critical role in stimulating M&A activity. This trend will likely continue as the policy support further boosts the market in 2025, fostering an environment conducive to strategic consolidation and innovation-driven growth.
Germany
Despite current economic uncertainties, business leaders expect the German M&A to regain strength in 2025. The interest rate cuts by the European Central Bank in 2024 led to more favourable financing conditions. The multiples have decreased, and valuation gaps are expected to narrow.
Under increasing pressure to deploy raised capital, PE investors are positioning themselves to capitalise on the anticipated economic recovery in Germany, expected by 2026. As a result, business leaders expect significantly more deals in the mid-cap and large-cap segments.
ESG- topics will continue to gain importance as German companies address pressures for technological and ecological innovation, fostering growth in acquisitions and strategic alliances in these areas.
Netherlands
While the country's M&A market is rebounding, the pace and scale of deals will depend on the macroeconomic factors. Sectors like technology and healthcare have a positive outlook, while real estate and retail may take longer to recover.
Private equity continues to play a significant role in consolidating fragmented sectors, particularly in healthcare and accounting. The installation sector is also undergoing consolidation, providing opportunities for strategic acquisitions.
Singapore
In Singapore, M&A activity is heavily driven by family offices and sovereign funds, making these entities key players in the market. For smaller players, the challenge remains in finding suitable buyers.
United Kingdom
The UK is poised for a strong M&A market in 2024, with activity levels expected to surpass 2023 on the back of a more stable economy. Private equity is focused on value creation, particularly in fragmented sectors like tech and tech-enabled services.
Although valuation gaps persist between buyers and sellers, these are expected to narrow if interest rates remain high through 2025.
USA
In the US West Coast, 2024 has been a reasonable year for M&A, especially in the middle market. As the economy stabilises post-election, expectations for 2025 are high, driven by lower interest rates, a reduction in regulation, and a favourable tax environment. The anticipated recession has not materialised, boosting optimism among business leaders and M&A professionals.
On the East Coast, M&A activity is expected to return to normal levels by Q1 or Q2 of 2025. The second half of 2024 saw a recovery, although there was a brief pause around the presidential election. With private equity firms under pressure to deploy capital and over $3 trillion available, strategic players actively seek deals to adapt to the evolving economic landscape.
The outlook for global and cross-border transactions in 2025
Trade tensions between the United States and China and instability in regions such as Eastern Europe are expected to continue driving volatility and uncertainty in global trade. As a result, a delicate balance between geopolitical challenges and economic opportunities will shape the cross-border M&A landscape in 2025.
However, these challenges also drive companies to rethink their strategies and pursue international opportunities to mitigate risks and diversify their operations. A potential interest rate reduction in the United States could boost capital flows to emerging markets, creating favourable conditions for increased M&A activity in some countries.
With significant amounts of dry powder, private equity funds will likely ramp up their search for assets in economies where valuations are more attractive and growth opportunities offer greater potential returns.
For example, these dynamics could strengthen Brazil's position as a strategic destination for investments, particularly in sectors aligned with global demand, such as mining, agribusiness, infrastructure, technology, and clean energy.
Still, despite this promising potential, the country's ability to capture this capital will depend on progress in key areas, including regulatory certainty and the overall business environment. Without greater stability and competitiveness, the country may struggle to translate interest into tangible investments.
Another country with the potential to leverage the current global climate is the Netherlands, where cross-border M&A activity is expected to remain robust despite global economic uncertainties as foreign investors see the Dutch market as a stable gateway to Europe, given the country's strategic location and stable economy. Ongoing consolidation in key sectors will likely drive cross-border deals as large PE firms and strategic players seek international expansion.
As onshoring slows overseas trade, US growth may attract more inbound investments, aided by reduced regulations. However, geopolitical tensions and retaliatory trade policies could create challenges.
While these factors may impact specific industries, US middle-market M&A is expected to stay strong in 2025, driven by PE acquisitions and businesses with succession issues. Growing global interest in US assets should also increase cross-border deals in the US.
Leveraging technology in the M&A process
In the latest survey, business leaders reported that companies increasingly leverage advanced tools to identify, evaluate, and integrate potential targets. Artificial intelligence (AI) and Big data are transforming the due diligence process, enabling faster and more accurate assessments of financial health, operational efficiency, and cultural fit.
AI and Big data analysis are critical in assessing potential targets, particularly in integrating M&A bolt-ons at a certain scale. These technologies can quickly identify targets and vet those clearly outside the defined investment thesis.
They also help buyers and sellers quickly identify, assess and negotiate deal points. As the technology matures, data analytics helps assess transactions using data tools and unlocks value post-close to drive efficiencies and growth opportunities. Predictive analytics can identify synergies and integration challenges early in the process, reducing the risk of post-merger failures.
Navigate 2025 with HLB
In today's evolving market landscape, strategic divestments and targeted investments can unlock significant opportunities for growth and resilience.
HLB's experienced transaction advisors are here to guide you through every step of the process, from valuation to execution, ensuring you maximise value and achieve your business goals. Visit HLB Transactions Services to learn more about how we can help drive your success.
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