As businesses navigate evolving economic landscapes, mergers and acquisitions (M&A) have tempered their pace in early 2025. This shift underscores a period of recalibration following a record wave of dealmaking in the prior year.

Market Slowdown in 2025

Global M&A volumes contracted by 9% in the first half of 2025 compared to H1 2024. After a resurgence in 2024 that followed the decade-low activity of 2023, dealmakers now face a more cautious environment.

In consumer markets, volumes also fell by 9%, even as a handful of large transactions drove a 13% increase in deal value. May 2025 saw an episodic upswing in both volume and value, hinting at pockets of resilience within the broader downturn.

Despite the pullback, the average deal size climbed to $648 million in 2024 from $631 million the previous year. This divergence between fewer transactions and larger individual deals reflects a market in search of certainty and high-impact opportunities.

The contrast between 2023’s steep 15% decline to $3.2 trillion and the rebound in Americas activity—where deal value rose to $1.8 trillion in 2024—illustrates the volatile dynamics that define today’s M&A landscape.

Key Drivers of the Slowdown

• Macroeconomic uncertainty and slowing growth: Slashed GDP forecasts and uneven recovery patterns have dampened deal appetite.
• Costlier financing and elevated rates: With interest rates stabilized above pandemic lows, the cost of capital has risen significantly.
• Regulatory hurdles and policy shifts: Stricter antitrust reviews, national security reviews, and evolving foreign investment rules have extended timelines.
• Strategic recalibration and price misalignment: Buyers and sellers are realigning expectations, favoring blockbuster deals over smaller targets.

Slower growth projections by major economies, including a US GDP forecast cut from 2.5% to 2.1%, have introduced caution. Meanwhile, global inflation, though cooling, remains elevated, pressuring budgets and returns.

Regulators have scrutinized mega-deals over $40 billion, particularly in tech and energy sectors. As policy makers weigh national security concerns, some transactions face unprecedented delays.

Regional and Sector Variations

The Americas continue to dominate global M&A, hosting 14 of the world’s 20 largest deals in 2024. Yet, H1 2025 saw a moderation even in this growth engine.

Cross-border transactions remain attractive for their diversification benefits, but diverging regional growth rates and regulatory complexities in Europe and Asia have constrained activity. China’s cautious outbound investment stance and Europe’s tightening of strategic sector reviews have led to slower deal flow.

In consumer markets, rising valuations have enticed strategic buyers. EBITDA multiples increased across North America and Europe, driven by digital transformation needs and shifting supply chain priorities. Private equity firms, sitting on abundant dry powder, delayed exits in 2024 but are now positioning for a rebound as market clarity improves.

Strategies for Navigating the Slowdown

In a cooling market, leaders must refine their approach to dealmaking. By focusing on quality over quantity, organizations can secure transformational assets without overextending resources.

• Conduct rigorous due diligence on targets to identify operational gaps, hidden liabilities, and cultural fit factors.
• Foster transparent negotiations to enable alignment on price expectations and reduce the risk of deal fatigue.
• Prioritize acquisitions that drive digital and AI capabilities as part of transformation through strategic acquisitions.
• Maintain access to flexible financing structures by leveraging relationships with banks and private equity, tapping into abundant dry powder among investors.

By embedding integration teams early and setting clear performance milestones, acquirers can accelerate value capture and build confidence among stakeholders.

Looking Ahead: Opportunities Amid Uncertainty

While short-term activity has slowed, the medium-term outlook is constructive. A new administration may ease certain antitrust constraints, spurring a renewed wave of mega-deals.

AI-driven consolidation stands out as a key theme. Companies reshaping their core operations around machine learning platforms will seek acquisitions to close talent and technology gaps. Sustainability and ESG commitments will fuel deals in renewable energy, carbon management, and circular economy ventures.

CEO sentiment reflects this optimism: although only 38% are confident in near-term revenue growth, 53% anticipate stronger performance over the next three years. This demonstrates faith in strategic M&A as a long-term growth lever, despite current caution.

Managing Risks and Building Resilience

Deal failure rates near 70–90% underscore the importance of proactive risk management. Companies can strengthen their resilience by anticipating integration challenges and regulatory hurdles.

• Implement comprehensive cultural integration programs that align leadership teams and establish a unified vision.
• Set aside contingency reserves to address unforeseen costs during integration, safeguarding against overruns.
• Engage independent advisors to aid in navigating uncertainty with disciplined due diligence and compliance reviews.

Through these measures, organizations can minimize disruption, preserve value, and emerge stronger when deal markets rebound.

Conclusion

The slowdown in M&A activity in early 2025 reflects a convergence of economic caution, higher financing costs, and regulatory scrutiny. Yet, within this lull lies an opportunity to fine-tune strategies, deepen due diligence, and pursue deals that drive genuine transformation.

Firms that emphasize meticulous planning, clear valuation alignment, and targeted investments in technology and sustainability will be best positioned to lead the next chapter of M&A. By capitalizing on episodic upswings in deals and building robust integration plans, businesses can turn today’s uncertainty into tomorrow’s competitive advantage.