Global merger and acquisition activity has experienced a significant resurgence, driven by a confluence of strategic realignments, improving financing conditions, and the substantial deployment of capital by private equity firms. This renewed vigor in dealmaking, particularly evident in the third quarter, signals a shift from cautious observation to proactive growth strategies among corporate leaders.
Third Quarter Surge in Deal Value
Data from Dealogic indicates a notable increase in M&A activity during the third quarter, with a collective deal value of $1.29 trillion. This figure represents an upward trend from the $1.06 trillion and $1.1 trillion recorded in the second and first quarters, respectively. While the initial half of the year was characterized by smaller, mid-market transactions, the third quarter witnessed the return of large-scale, high-value deals. Mergermarket reports that the global deal value for the first nine months exceeded $3.4 trillion, marking a 32% year-on-year increase and the strongest performance since 2021.
The Rise of Megadeals
The current surge in M&A is largely attributable to megadeals, defined as transactions valued at $10 billion or more. During the first nine months of the year, 49 such transactions were announced, a record for this period. Two prominent examples include Union Pacific’s $85 billion acquisition of Norfolk Southern and the $55 billion take-private deal for Electronic Arts by a consortium including the Public Investment Fund of Saudi Arabia. According to EY-Parthenon, a significant majority of surveyed CEOs, specifically 48%, are planning further acquisitions, indicating a sustained commitment to expansion through M&A.
Factors Fueling Dealmaking Momentum
Several key factors are contributing to the robust M&A environment. The acceptance of geopolitical and trade uncertainty as the “new normal” has encouraged leaders to move beyond a “wait-and-see” approach. Furthermore, expectations of interest rate cuts by central banks have improved financing conditions, making it more attractive for companies to borrow for acquisitions. The Federal Reserve’s anticipated rate cuts provide greater clarity on financing costs, enabling easier pricing and structuring of deals. Additionally, there is a substantial amount of “dry powder”—uninvested capital—held by private equity firms, estimated by Bain & Company to be around $1.2 trillion globally, eager to be deployed.
Strategic Repositioning and Fintech Growth
Companies are actively engaging in strategic repositioning, often divesting non-core assets to focus on emerging opportunities, particularly in areas like artificial intelligence. This trend is creating a demand for AI-linked assets, including data, infrastructure, and talent. The initial public offering (IPO) market has also shown signs of life, with volumes climbing approximately 12% year-on-year as of early September, according to JPMorgan’s mid-year M&A outlook report. This growth is partly fueled by strength in the fintech and industrials sectors, along with renewed interest in significant tech listings. Investment banking firms are experiencing a ramp-up in activity, with advisory fees reflecting this heightened engagement.
Challenges in Mid-Market and Creative Deal Structures
Despite the overall positive trend, smaller and mid-cap M&A activity remains somewhat subdued. This segment faces headwinds such as valuation gaps and a more challenging exit environment, particularly for smaller entities more susceptible to policy shifts. While financing costs are expected to decline, current elevated expenses, coupled with seller expectations anchored in higher past valuations, present obstacles. To navigate these complexities, sponsors and corporations are increasingly utilizing creative deal structures. These include joint ventures with buyout options and continuation vehicles, which allow private equity firms to hold portfolio companies beyond the traditional fund lifecycle. These innovative approaches are essential for facilitating transactions in the current market landscape.
David Thompson earned his MBA from the Wharton School and spent five years managing multi-million-dollar portfolios at a leading asset management firm. He now applies that hands-on investment expertise to his writing, offering practical strategies on portfolio diversification, risk management, and long-term wealth building.