M&A Market Rebounds Strongly in 2025, Setting a Robust Stage for 2026

The year 2025 in the mergers and acquisitions (M&A) market unfolded as a story of two distinct halves. The year began with optimism, underpinned by expectations of declining inflation and interest rates throughout 2025, alongside a pro-business deregulatory approach anticipated in the United States under a second Trump administration. Political uncertainties that had clouded 2024 eased with new leadership in several major economies, each prioritizing economic growth. Market commentators generally viewed the fundamentals for M&A in 2025 positively, following muted activity in 2023 and 2024.

However, this positive momentum shifted abruptly in early April 2025. The second quarter opened amid uncertainty stemming from U.S. tariff policies and the responses of affected economies, raising concerns about the broader outlook for global trade. The immediate impact was severe: M&A activity stalled, with numerous deals in progress either abandoned or significantly delayed. The usual pipeline of new deals nearly dried up as dealmakers paused to assess the tariff war’s implications on global economic activity. This shift in sentiment was detailed in Norton Rose Fulbright’s annual M&A Trends and Risks Survey.

Despite this setback, the M&A market demonstrated remarkable resilience. Following a sluggish second quarter, activity rebounded strongly in the second half of 2025. Strategic investors and private equity firms regained momentum, capitalizing on the easing of tariff tensions. Market participants refocused on favorable factors such as falling inflation, moderating interest rates, abundant capital availability, and a broadly deregulatory policy environment. Politicians worldwide emphasized growth agendas amid a less volatile geopolitical climate. The latter half of 2025 emerged as one of the most active six-month periods for dealmaking in recent memory, culminating in a record year marked by transformative transactions from both strategic and private equity players.

Six key themes shaped the M&A market in 2025 and are expected to continue influencing activity in 2026.

First, the market’s recovery in the second half of 2025 was driven by a surge in deal volumes, particularly mega-deals involving strategic and private equity investors. This contrasted sharply with the cautious environment of 2023 and 2024, when geopolitical tensions, inflation, and rising interest rates had dampened dealmaking enthusiasm. The hesitancy that characterized earlier years dissipated as 2025 progressed, and while the recovery is expected to persist into 2026, it may not maintain the same rapid pace.

Second, interest rate cuts implemented in late 2024 and throughout 2025 lowered borrowing costs, facilitating easier access to capital for dealmakers. Strong bank and private credit balance sheets, further supported by anticipated regulatory capital requirement changes in the banking sector, are expected to bolster financing availability in 2026.

Third, political leaders who assumed office in 2024 and early 2025 have prioritized economic growth and adopted deregulatory policies, particularly regarding antitrust enforcement. This trend has been notable in the United States, United Kingdom, India, and Japan. These leaders face pressure to deliver on growth promises in 2026, which should enhance economic sentiment and support M&A activity.

Fourth, private equity sponsors deployed record levels of capital in 2025, monetizing aging portfolios through sponsor-to-sponsor transactions and continuation funds. The emergence of strategic players seeking transformative assets held by private equity further energized the market. Consequently, private equity firms enter 2026 with unprecedented “dry powder,” positioning them to sustain robust dealmaking.

Fifth, the accelerating artificial intelligence (AI) agenda has become a strategic imperative for companies across sectors. Pressured to adopt AI, cloud security, and digital infrastructure to remain competitive, many firms are turning to M&A to achieve these objectives. Anecdotal evidence indicates that AI considerations now dominate boardroom discussions, suggesting an increase in AI-related deals in 2026.

Sixth, corporates have recognized the importance of portfolio optimization, scale, and resilience amid a broader de-globalization trend driven by geopolitical risks that have intensified since the COVID-19 pandemic.

Looking ahead, the M&A market remains sensitive to discrete events, as demonstrated by the tariff war’s impact in early 2025. Nonetheless, the market’s resilience is evident. Expectations for 2026 include continued moderation of inflation and interest rates, sustained optimism among strategic and private equity investors regarding global growth, and ongoing deregulatory policies in major economies. These factors collectively point to another strong year for M&A activity in 2026, albeit potentially not surpassing the exceptional levels achieved in 2025.