While the M&A market’s strong 2025 performance has continued into this year and is expected to remain healthy, dealmakers nonetheless can’t take stability for granted.
Virtually all the growth last year was in the form of large deals as opposed to a high volume of deals, which is often a bellwether for broader growth, law firm WilmerHale noted in a new M&A report. It was a global pattern.
In particular, private equity firms are facing strong pressure to deploy deep wells of committed capital, and venture capital firms are equally under the gun to return capital to investors following a three-year decline in cash flows to limited partnerships.
However, the war in Iran presents some fairly significant potential impediments, including the cost of credit and rising inflation. While the Federal Reserve has trimmed interest-rate cuts six times since September 2024, the energy shock and supply chain disruptions from the war are likely to dampen both global and U.S. GDP growth and thereby act as a drag on the market, WilmerHale wrote.
Another area of concern is the regulatory environment. Although there has been “renewed receptivity” to negotiated settlements, structural remedies and divestitures in antitrust cases, a “pro-growth” sentiment can conflict with an “America First” stance, the report pointed out.
“M&A transactions that have a negative cost-of-living impact on American consumers or raise national security concerns may continue to receive increasing scrutiny,” WilmerHale said.
Additionally, while artificial intelligence is an increasingly dominant force in the market, the enthusiasm around new technologies could negatively affect some sectors, most prominently in the still-massive market for non-AI-driven software.
At the same time, “underwhelming macroeconomic fundamentals” are likely to limit organic growth in other sectors, according to the report. As the valuation gap between what buyers are willing to pay and what sellers are willing to accept declines, strategic acquirers in sectors such as technology, healthcare and manufacturing will see the most opportunities.
Just as last year brought a bountiful supply of large deals in regions around the world, the same held true within most verticals. In technology, for example, global deal value increased by 54% from 2024, even though deal volume inched up by less than 1%.
In several other industries, deal value increased substantially despite declining deal volumes. That was the case for life sciences (+51% and -15%, respectively) and financial services (+11%, -7%). The energy sector, however, was down all around (-14%, -18%).