From Caution to Capital: The Strategic Rebound of 2025

Following a sluggish start to 2025, global mergers and acquisitions (M&A) activity has begun to show signs of revival. A series of high-value deals highlighted a return of strategic confidence, yet questions remain over whether this momentum is sustainable or if it proves to be short-lived. This article examines the drivers behind this rebound, analyses key deals, assesses the sustainability of this trend, and considers potential future implications.

What were the key strategic drivers of the rebound?

Several macroeconomic and policy shifts contributed to the cautious resurgence in global M&A activity in 2025. The European Central Bank’s monetary policy decision on 5 June 2025 implemented a 25 basis point rate cut across its key interest rates, moderating inflation and strengthening monetary transmission. The aims of inflation stabilising sustainably around its 2% target, with the 25 point rate cut, suggest a reduction in the cost of capital and encourage strategic investment. 

In parallel, US bank deals surge as Trump-era regulators race through approvals, with the Trump administration’s stance seen as more merger-friendly. Faster approvals and reduced scrutiny encouraged dealmakers, with the average time of completing a deal falling to four months this year, the shortest since 1990. According to the Wall Street Journal, investor sentiment improved as expectations of deregulation, lower corporate taxes, and faster deal clearance took hold. Moreover, according to the Financial Times, about 150 bank mergers worth $45 billion have closed so far this year, putting 2025 on track to be the industry’s busiest year in terms of deals since 2021. On the other hand, tariff volatility, especially with U.S.-China and U.S.-EU relations, continues to complicate cross-border valuations and deals. Despite this, the combination of lighter regulation and falling interest rates have helped restore strategic confidence and uptick deal activity in 2025.

What were the key deal highlights of 2025?

M&A activity rebounded sharply in 2025, with global deal value exceeding $1 trillion in the third quarter alone. This resurgence was driven by a wave of megadeals, including the $55 billion leveraged buyout of Electronic Arts and a remarkable $80 billion in U.S. transactions agreed within a single 24-hour window. Another notable deal was the $63 billion merger agreement between American Water Works Company and Essential Utilities. The FT attributes this momentum to falling interest rates, improved tariff clarity and a more permissive regulatory tone under the Trump administration.

Other high-profile transactions included Union Pacific’s $85 billion bid for Norfolk Southern, Anglo American’s $50 billion combination with Teck, and Palo Alto Networks’ $25 billion acquisition of CyberArk. Notably, the Financial Times mentions that 47 deals valued above $10 billion were announced in the first three quarters of 2025, the highest count since the London Stock Exchange Group began tracking such records. Collectively, these transactions highlight the scale and strategic ambition that took place for M&A in 2025. With confidence on the rise and macroeconomic conditions continuing to improve, further high-value dealmaking is anticipated in the final months of the year.

Evaluation and Strategic Implications

While 2025 marked a decisive return for global M&A, the scale and speed of dealmaking raise questions about long-term sustainability. The surge in megadeals reflects strategic confidence, but also places pressure on future deals. According to McKinsey & Company, geopolitical instability and changes in trade policy will influence M&A activity in the months to come. The waves of tariffs and effects on inflation rates could complicate M&A deals further and create longer agreement processes.

Artificial intelligence has played a growing role in streamlining deal processes, particularly in due diligence. As EY highlights, AI tools have enhanced both the efficiency and effectiveness of deal execution, and with this, human-machine collaboration has “produced a better result than either could have achieved.” The integration of AI into M&A workflows is a key contributor to the 2025 rebound, allowing firms to act with greater speed and confidence.

The Trump administration’s permissive stance towards large deals has accelerated deal activity in 2025, but this may prove temporary. A reversal in interest rates or renewed tariff wars could reduce confidence, and deal momentum may stall. Ultimately, sustaining the current surge in megadeals will depend on firms’ abilities to navigate uncertainty in the macroeconomic environment. As institutions prepare for 2026, the rebound of M&A activity is a test of durability and not a guaranteed projection.

The 2025 rebound reflects strategic optimism, driven by sector-specific momentum and macroeconomic tailwinds. Yet, the threats of overreach persist, especially against a backdrop of economic uncertainty. As institutions look ahead to 2026, the question remains: is this the start of a sustained recovery, or a short surge before another drop-off?