California Gazette

M&A Trends and Strategies to Stay Ahead in 2025

M&A Trends and Strategies to Stay Ahead in 2025
Photo: Unsplash.com

It’s no secret that high interest rates, inflation, and general uncertainty on the world political stage have influenced mergers and acquisitions (M&A) activity throughout the past year. This followed a relatively weak 2023 for the M&A market. Approximately 40,000 deals closed worldwide in 2023, reflecting a 20% decrease from the previous year.

While 2024 showed some improvement, it did not deliver the robust recovery many anticipated.

Is 2025 Poised for a Comeback?

Each January brings renewed speculation about whether the coming year will bring a resurgence in M&A activity. Will 2025 be a significant year for deal-making? Could M&A transactions set new records? Will this be an opportune time to pursue an acquisition-led growth strategy?

Potentially. Interest rates are declining, and inflation appears to be stabilizing. These economic conditions were among the most significant obstacles in 2023 and 2024.

However, 2025 also brings a shifting regulatory environment with a new presidential administration. It is essential to consider political factors alongside technological advancements, industry-specific growth indicators, and renewed confidence from private equity firms, which could contribute to a notable increase in M&A activity.

Let’s explore specific trends and strategies that could help businesses navigate the evolving deal-making landscape this year.

Deals Structured with Increased Due Diligence

The financial climate of the past few years has fostered a heightened emphasis on due diligence. Economic uncertainty has led to a greater focus on financial stability and increased scrutiny of ESG (economic, social, and governance) and regulatory initiatives.

This challenges sellers, as prolonged due diligence processes can increase deal uncertainty. To mitigate potential issues, sellers increasingly invest in sell-side due diligence to proactively address buyer concerns.

At Embarc Advisors, we recommend that sellers consider sell-side due diligence as a strategic exercise to enhance their market positioning. When executed effectively, this process can facilitate faster deal closures, potentially reducing the timeline from 12 to 15 months to six to nine months.

A Potential Shift in Regulatory Scrutiny

While there are signs of increased deal activity, not all transactions will proceed without obstacles. Regulatory scrutiny, particularly regarding antitrust concerns, remains a key consideration. In 2022, the Federal Trade Commission (FTC) played a significant role in evaluating Microsoft’s acquisition of Activision Blizzard.

Although Microsoft ultimately completed its acquisition, regulatory challenges continued into 2024, with aspects such as post-merger layoffs and pricing strategies receiving significant scrutiny. Similarly, U.S. Steel has encountered regulatory roadblocks, with a previous acquisition offer blocked over national security concerns and a new bid currently under review.

With a new administration in office, regulatory priorities may shift. For example, Securities and Exchange Commission (SEC) Chair Mark Uyeda has expressed support for more business-friendly policies, which could lead to more defined regulatory guidelines and adjustments in regulatory approaches.

Additionally, Andrew Ferguson, the Federal Trade Commission (FTC) nominee, has signaled interest in reconsidering specific regulations, describing past policies as potentially restrictive toward mergers. These possible changes may contribute to a more predictable regulatory environment.

A prudent strategy involves conducting thorough regulatory assessments in advance. Performing a mock regulatory review to identify potential risks and engaging with regulatory bodies early in the process may help companies navigate complex requirements more effectively.

Energy-Transition Technology Deals Are Gaining Momentum

Each year, specific industries stand out as key drivers of M&A activity. For several years, software-as-a-service (SaaS) and artificial intelligence (AI) have led deal volume and value.

In 2025, signs point to energy-transition technologies taking center stage. Companies focused on technology-driven solutions for transitioning from fossil fuels to more sustainable energy sources are poised for growth.

Larger energy companies may pursue acquisitions to diversify their portfolios, while technology firms could seek entry into the energy market. The push toward green energy presents a compelling opportunity for companies looking to align with sustainability trends while expanding their market presence.

M&A activity in this space will likely focus on renewable energy solutions, including solar and wind energy, energy storage innovations such as lithium-ion batteries and thermal storage, grid modernization efforts, and alternative fuels.

For companies outside the energy sector, 2025 may provide an opportunity to reassess sustainability initiatives and explore synergies with green energy solutions. Businesses in various industries could consider investments that enhance their sustainability efforts while strengthening their competitive positioning.

For example, retailers have re-evaluated their supply chains to minimize reliance on carbon-based fuels for logistics and last-mile delivery. While the link between green energy and consumer goods may not be immediately apparent, there is potential for downstream benefits. A large consumer goods company aiming to streamline operations might acquire a smaller green energy firm to integrate sustainable manufacturing practices, creating economic and environmental advantages.

The Takeaway: M&A Activity May Strengthen in 2025—Be Prepared for Emerging Opportunities

As 2025 unfolds, the M&A landscape appears increasingly dynamic. Economic stabilization, declining interest rates, and potential regulatory adjustments could foster an environment conducive to deal-making. However, evolving due diligence requirements, shifting regulatory frameworks, and the continued importance of ESG considerations will influence transaction structures and execution strategies.

Ultimately, success in 2025’s M&A market will require a measured and strategic approach—balancing foresight, comprehensive due diligence, and adaptability to changing market conditions.

Disclaimer: This article includes forward-looking statements based on available data and industry insights. Future outcomes may vary. The information provided does not constitute financial, investment, or legal advice.

Published by Tom W.

(Ambassador)

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