Global Dealmaking Hits $4.5tn in Second-Best Year on Record

Why corporate boardrooms, private equity giants and sovereign funds have rediscovered their appetite for mega-mergers — and what it means for Europe’s economy

Global mergers and acquisitions surged back to life in 2025, with worldwide dealmaking reaching $4.5 trillion, making it the second-busiest year in history, surpassed only by the frenzied post-pandemic boom of 2021.

After two years of paralysis triggered by inflation shocks, rate rises and geopolitical fragmentation, the rebound signals something deeper than cyclical relief. Corporate confidence has returned — and with it a belief that scale, technology and strategic positioning matter more than ever in an increasingly fragmented global economy.

For Europe, where sluggish growth and competitive pressure from the US and Asia have raised existential questions, the revival of global dealmaking may be one of the most important economic developments of the decade.

From paralysis to power plays

Between late 2022 and most of 2024, global M&A volumes fell by nearly 40 per cent as boards retreated from risk. Soaring borrowing costs made leveraged buyouts unattractive. Valuations became unstable. And regulators, particularly in Brussels, Washington and Beijing, signalled hostility to large consolidations.

That freeze has now thawed dramatically.

By mid-2025, megadeals had returned across energy, technology, defence, healthcare and financial services, driven by three converging forces: easing interest rates, the strategic shock of artificial intelligence, and geopolitical re-alignment of supply chains.

Executives are no longer waiting for perfect macro conditions. They are buying growth.

As one senior European investment banker put it: “The cost of standing still has become higher than the cost of doing deals.”

That logic mirrors a wider shift in Europe’s corporate psyche — one already visible in debates about how to fix the continent’s stagnation, including the arguments explored in Why Europe’s productivity problem is holding back its global competitiveness.

The return of the megadeal

Unlike the speculative frenzy of 2021, this deal wave is not driven by cheap money chasing any asset with a story. Instead, 2025’s activity has been defined by strategic consolidation.

Energy companies are buying power grids, storage providers and hydrogen infrastructure. Defence groups are acquiring cyber-security firms and AI-driven battlefield software. Banks are merging to survive rising compliance costs. Tech giants are swallowing start-ups to secure talent before competitors do.

In Europe, some of the most aggressive buyers have been companies that previously avoided big acquisitions. French, German and Nordic corporates, in particular, are using M&A to defend their global relevance.

This shift reflects the structural reality that Europe’s domestic markets are too small to support global champions without cross-border scale — a problem that has long undermined the continent’s ambitions, as analysed in Why Europe is losing the global tech race.

The difference now is urgency. With American and Chinese firms growing ever larger, European boards fear becoming prey if they do not act.

Private equity storms back

Private equity, dormant for much of the rate-hiking cycle, has also re-entered the arena.

The industry is sitting on more than $2 trillion of undeployed capital, known as “dry powder”. Falling bond yields and stabilising valuations have suddenly made deals financeable again.

The result has been a wave of buyouts in software, healthcare services, logistics and specialist manufacturing — sectors seen as resilient to both automation and geopolitics.

This resurgence is particularly important for Europe, where family-owned industrial businesses are struggling to fund digital transformation. Many now see private equity not as a threat but as a lifeline.

That dynamic ties into the broader crisis facing European labour markets, outlined in Why Europe faces a growing talent shortage — and how it could reshape the continent’s economy. Buyers are not just purchasing assets; they are buying skills.

America’s deal machine

The US has once again been the engine of global dealmaking, accounting for nearly half of all transaction value in 2025.

America’s dominance is structural. It has deeper capital markets, more permissive regulators, and an entrepreneurial culture that treats M&A as a core growth tool rather than a last resort.

US technology giants, in particular, have been among the world’s most aggressive acquirers, buying everything from AI model developers to cloud security firms. These deals are less about market share and more about controlling the infrastructure of the digital economy.

Europe, by contrast, still struggles with regulatory fragmentation. Deals that sail through Washington can take years in Brussels. But that may be changing, as policymakers realise that blocking consolidation has left European firms too weak to compete globally.

The tension between competition policy and industrial strategy is now one of the most important questions in European economics — and one increasingly shaping deal flows.

Asia’s strategic buying spree

China and the wider Asia-Pacific region have also returned to global markets, though with a different focus.

Chinese companies are no longer chasing trophy Western brands. Instead, they are buying resources, chips, logistics hubs and energy assets — the building blocks of long-term economic security.

Japan, meanwhile, has become one of the world’s most active overseas acquirers, with its cash-rich conglomerates snapping up software, automation and healthcare businesses across Europe and North America.

These moves underline a reality that many European leaders are only just confronting: M&A is now as much about geopolitics as profit.

As global trade fragments, ownership of strategic assets matters more than ever.

Europe’s moment of reckoning

For Europe, the $4.5tn deal boom presents both opportunity and danger.

On one hand, it offers a route to building companies large enough to compete globally. On the other, it risks seeing European assets swallowed by better-capitalised foreign buyers.

This dilemma sits at the heart of Europe’s struggle to create world-class corporations — a challenge explored in Who killed Europe’s single-market dream?, which charts how regulatory and political divisions have weakened the continent’s economic clout.

If Europe does not allow its own companies to consolidate, it will simply watch them be acquired.

Already, US and Middle Eastern sovereign funds have been among the most active buyers of European infrastructure, renewable energy and financial assets.

The continent’s policymakers face a stark choice: facilitate European-led megadeals, or surrender control of strategic industries.

A more disciplined boom

Unlike previous M&A cycles, today’s buyers are being forced to show discipline.

Shareholders are far less forgiving of empire-building. Boards demand synergies, cost savings and clear strategic logic. Deals are structured more conservatively, with earn-outs and performance clauses replacing all-cash splurges.

This discipline reflects scars from past excesses — and a recognition that the global economy remains volatile.

It also means the current boom is likely to be more sustainable than the bubbles that preceded it.

That matters for Europe’s banks, which are once again financing deals but remain wary of the risks, particularly after years of regulatory pressure and capital constraints — issues dissected in Will the rest of the world follow the US in deregulating banks?

What happens next?

Most bankers expect dealmaking to remain strong into 2026, even if volumes fluctuate.

The forces driving consolidation — digital disruption, ageing populations, defence spending, supply-chain re-engineering — are not going away. If anything, they are accelerating.

For Europe, the revival of M&A may prove to be one of the few mechanisms capable of breaking its cycle of low growth and fragmented markets. Read more in European Business Magazine’s European News.

Whether it leads to the creation of true European champions — or simply a fire sale of assets to global buyers — will depend on decisions being made in boardrooms and ministries right now.

What is certain is that global capitalism has rediscovered its appetite for big bets. With $4.5tn already on the table, the age of caution is over.

And in a world where scale increasingly equals survival, dealmaking is once again the most powerful weapon in corporate strategy.

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