M&A Outlook: Analyzing 2024’s Challenges and Predicting 2025’s Trends

Despite the growth of mergers and acquisitions (M&A) that was encountered last year, the landscape is far from stable.

However, dealmakers are optimistic about 2025, predicting more deals across industries, and expressing high hopes for innovation in generative AI and business processes.

Across industries, executives claim increased resilience against external shocks and appear to prefer adaptation tactics over the previously popular divestment approach.

Is this any sign of the sky clearing on the M&A horizon?

Brief review of the 2024 M&A evolution

In 2024, global M&A activities totaled US$2.1 trillion, an increase of 3% compared to 2023, although this value is still lower than the 2018-2022 average of US$3.1 trillion.

Despite the 3% growth, the overall number of deals dropped from 34,200 in 2023 to 32,000 in 2024. This figure differs dramatically from the record high of around 41,200 deals back in 2021.

There were some noticeable regional differences during 2024, as noted by the Boston Consulting Group:

1. In North America, deals involving targets reached US$1.2 trillion, a 1% increase over 2023.
2. In Europe, M&A values hit US$483 billion, registering a 16% increase the previous year, mostly driven by activity in the United Kingdom (120%) and France (45%).
3. In Asia-Pacific, deal values decreased by 2% to US$391 billion, with India showing a 73% increase, Japan 25%, and South Korea 21%.
4. In Africa, deal values surged by 44%, hitting US$13 billion.
5. In the Middle East, deal values declined by 21% to US$18 billion.

In 2024, the sectors that stood out as recording the biggest increases in total deal values compared to 2023 were financial institutions and real estate, tech, media and telecom (TMT), and the consumer and healthcare sectors.

Top three largest M&E deals in 2024

1. $47 Billion - Couche-Tard’s bid for Seven & i holdings

The Japanese firm Seven & i, the owner of 7-Eleven - a global chain of convenience stores, was offered $47 billion by Couche-Tard, which is 22% higher than the previous offer that was rejected. The transaction could expand Couche-Tard's network by 85,800 outlets.

2. $35.9 Billion - Mars’s acquisition of Kellanova

Mars, which is paying a 33% premium for Kellanova's stock, wants to increase its market share in the snack market in view of the fact that consumers are switching to less expensive brands due to inflation. The anticipated closing date of the deal is mid-2025.

2. $35.3 Billion - Capital One’s Merger with Discover

In anticipation of final regulatory approval in early 2025, Capital One has gained approval to purchase Discover Financial for $35.3 billion in all stock. Capital One will gain access to Discover's card network, which levies processing fees on merchants, to lessen its reliance on Visa and Mastercard.

Challenges faced in the M&A market in 2024

Last year was anything but stable for mergers and acquisitions. Here are some of the challenges that the dealmakers had to contend with.

1. Macroeconomic challenges

1. Central banks kept interest rates high for longer than expected, which, in turn, raised borrowing costs and increased the cost of financing transactions, according to PricewaterhouseCoopers.
2. Consistent inflation forced companies to deal with higher costs, and dealmakers became much more cautious, according to Morgan Stanley experts.

2. Geopolitics tensions

1. Conflicts in several key regions had an impact on the global economy.
2. Stricter antitrust and foreign investment laws, particularly in the U.S. and Europe, as well as the U.S. presidential election, caused uncertainty as businesses correctly expected shifts in policy.

3. Factors within the market

1. Private equity companies, key forces behind M&A activity, slowed down their activities because of exit difficulties and high capital costs, which led to aged portfolios and less interest in new acquisitions, according to Bain and Company.
2. Businesses pursued M&A to keep up with the trends of AI and digitization, but thorough research and risk evaluation slowed down dealmaking.

Cautious optimism while navigating the 2025 M&A landscape

The 2025 M&A Trends Survey: A time to pivot, released by Deloitte, offers a better picture drawn from the expectations of 1,500 U.S. based dealmakers for the next 12 months.

Long story short, corporate and private equity leaders anticipate a boom in activity that will be driven by strengthening economic conditions and a dynamic year for the M&A market. However, geopolitical and policy uncertainties will continue to moderate this confidence.

Optimism reaches pre-pandemic highs

Dealmaker optimism has increased to heights not seen since the COVID-19 pandemic. Executives today say they are now more resilient to external shocks, having withstood inflationary pressures.

The Deloitte survey reveals that leadership is increasingly trusting innovation to generate value. Of the total participants in the survey, 26% were CEOs, which is 6% more than in 2023.

Last year’s recovery can lead to growth in the near future

In 2024, a gradual recovery occurred as a result of falling interest rates and fewer concerns of a recession, which has subsequently set the foundation for a more dynamic 2025.

Around 75% of executives anticipate larger deals over the next 12 months. At the same time, 79% of corporates and 87% of private equity leaders expect to make more deals overall.

Adaptation is now a new standard in M&A

In the early 2020s, several factors slowed M&A down, including the COVID-19 pandemic and high rates of unemployment, which forced businesses to start to look for alternatives to traditional M&A.

Today, having witnessed signs of economic improvement, dealmakers are preparing for more mergers and acquisitions.

Although divestments or selling business operations is still a critical strategic tactic, businesses are giving more importance to traditional M&A, joint ventures, and alliances.

Tech integration and the role of generative AI

97% of the participants of the Deloitte 2025 Trends survey commented they had integrated the latest technologies, including data analytics and AI-driven due diligence, into M&A processes.

Final word

To increase the chances of success in 2025, private equity industry leaders should combine proven strategic discipline with modern tools and technologies. Dealmakers should bear in mind that despite the gradual rebound, long-term success will come from resilience.