Bullish Outlook for M&A Activity in 2025

The coming year is shaping up to be a strong one for mergers and acquisitions (M&A), as the combination of private equity firms with substantial cash reserves and a business-friendly policy environment in the US could drive dealmaking. Australian investment banks report rising optimism amid falling interest rates and a weaker Australian dollar, but challenges like valuation gaps remain.

M&A activity in Australia hit US$118 billion in 2024, the highest in two years. However, it still trails behind the boom seen in 2021 and 2022. Many private equity firms have held back on selling portfolio companies due to higher financing costs weighing on valuations, creating mismatches between sellers’ expectations and buyers’ willingness to pay.

The global private equity market sits on an estimated US$4 trillion in un-deployed capital, which industry insiders believe could lead to a surge in activity. Lower interest rates and improving US economic conditions under a pro-growth administration are expected to drive inbound investments, particularly from North America, Japan and Europe.

Analysts foresee significant exits of older private equity portfolio assets in sectors like digital infrastructure, renewable energy and technology. Meanwhile, Australian corporates appear focused on simplifying their structures to unlock value, which could further fuel domestic M&A transactions.

The broader economic shift toward technology, AI and sustainability reflects a transition from traditional industries to growth-focused sectors, signalling potential for increased cross-border deals targeting advanced capabilities. With ample leverage in both cash and opportunities, the upcoming year seems poised to be a dynamic chapter for M&A globally and domestically.

Source: Australian Financial Review, Goldman Sachs, Corrs