Deloitte M&A Index 2025 Q1: Capture of Opportnuity
Given the steady growth in the number of deals over the past year and the improving economic environment, the Deloitte M&A Index anitipates a further increase in the number of European deals in the next quarter. The forecast expects 3,481 deals, which would represent a 5% increase compared to the previous quarter.
"Macroeconomic conditions and market volatility have always been key factors influencing M&A activity. In an optimistic scenario, the number of European deals could reach up to 4,000. This scenario would require, among other things, an acceleration in the pace of economic growth, a reduction in interest rates and a shift in investor sentiment towards more positive financial expectations. Despite the uncertainty caused by the new tariff policy and the subsequent shock to international trade, we expect a slight increase in the number of transactions in the coming quarter, thanks to the stabilisation of inflation last year and the renewed growth of the European economies. Companies should continue to actively manage their portfolios and take advantage of the improved economic conditions to expand, make strategic acquisitions or divest," explains Miroslav Linhart, Partner in Charge in Financial Advisory at Deloitte.
The M&A markets continue to be supported by record cash balances of unallocated private equity capital, which stood at approximately US$2.51 trillion at the end of last year. Financial and strategic investors are expected to begin re-entering the market this year and unwinding their accumulated capital through investments in synergistic businesses or high-quality assets, such as companies with strong market positions, longevity and successful business strategies.
“Unallocated private equity capital amounting to USD 2.5 trillion continues to encourage M&A markets. While geopolitical tensions and structural challenges remain, cheaper borrowing costs and renewed consumer confidence are creating fertile ground for dealmaking. The M&A landscape is poised to benefit from these favourable conditions as opportunities emerge across Europe.”
adds Jan Vomáčka, partner and head of the transaction advisory team at Deloitte.
Summary of M&A market in 2024
Global developments and politics continue to influence markets, according to Deloitte experts. The war in Ukraine continues without either side gaining a decisive advantage. The dynamics of tensions in the Middle East changed during the year with the arrival of new actors in the conflict between Israel and Hamas and the fall of the Syrian regime. These events had a negative impact on financial markets, supply chains, oil and other commodity prices. However, the past year has also provided the necessary time for agents to adapt and prepare for similar risks, which has led to a calming of price levels, but also to further fragmentation of the global economy.
Despite increasing global conflicts and political tensions, along with tight monetary policy, 2024 has evolved as a period of consolidation, and recovery. Relatively stable commodity prices played a key role in supporting disinflationary tendencies throughout the year. However, households and many businesses, particularly in Germany and the Central and Eastern Europe (CEE) region, continued to face persistent economic challenges that constrained household consumption - the main driver of economic growth. Nevertheless, the situation is slowly improving. After several years of stagnation, real wages have begun to rise, while at the same time a slow growth in (still low) consumer confidence is beginning to take effect. A combination of factors, including not only fading inflationary pressures and a cautious optimistic outlook, positively shaped the economic environment. Year 2025 thus represents an interesting starting point at the beginning of the next business cycle.
There has been a slight increase in the number of transactions over the past year, from 11,629 in 2023 to 12,682 in 2024, representing a 9.1% year-on-year increase, bringing total transaction volumes close to pre-war levels. In addition, the total value of transactions has also seen a significant recovery, namely a 48% year-on-year growth.
The European market is growing faster than both the US and the global market in terms of number of transactions. It recorded a growth of 9.1%, while the global growth was only 7.5%. However, half of this growth was due to US overseas acquisitions. Looking further at the recovery from the downturn of previous years, Europe is only just catching up with global activity levels. In comparison to 2021, only 74% of transactions took place in Europe, while in the US it was 79 %.
Majority of European countries have recovered from last year's downturn. The main drivers of growth were three major markets, namely the UK (+12.2 %), Sweden (+51.6 %) and Spain (+36.7 %), which accounted for 38 % of all European transactions. For ten countries, the decline was delayed and subsequently they were affected this year. Among the most affected was the major market of France (-12 %), but also Greece (-33 %) and Bulgaria (-29.2 %).
The manufacturing industry continued to dominate M&A activity, accounting for 24 % of the total number of transactions last year. It was closely followed by the technology, media and telecommunications (TMT) sector with 21.5 % and retail, which remained in third place with 15 %. The biggest change between 2023 and 2024 was in category of other transactions, which increased from 9% to 12.5%.
The full M&A Index, which includes a comprehensive summary for 2024, can be downloaded here.
