Mergers and acquisitions (M&A) activity has declined significantly in the first half of 2025, with total deal value reaching USD 50 billion, marking a 17% decrease compared to the same period in 2024. This downturn comes amid ongoing global economic challenges that continue to reshape investment strategies.
Despite the year-over-year decline, the M&A market showed signs of recovery when compared to the second half of 2024, posting a modest increase in overall deal value. This sequential growth suggests that while the market remains below previous highs, it may be stabilizing after a period of contraction.
Changing Investment Strategies
Investors have shifted their approach in response to economic uncertainties, now concentrating their resources on a smaller number of high-value transactions. This trend toward larger, more strategic deals reflects a more cautious investment climate where quality is prioritized over quantity.
The data indicates that companies are being more selective with their acquisition targets, focusing on deals that offer clear strategic advantages rather than pursuing growth through numerous smaller acquisitions. This approach minimizes risk while potentially maximizing returns in an unpredictable economic environment.
Power Sector Leads M&A Activity
Among various industries, the power sector has emerged as the most active area for M&A transactions during this period. Renewable energy projects, in particular, have attracted substantial investment interest, continuing a trend that has been building over several years.
The strong performance of the power sector highlights the ongoing energy transition, as companies and investors position themselves to capitalize on the shift toward cleaner energy sources. Key factors driving this interest include:
- Government incentives and supportive regulatory frameworks for clean energy
- Long-term growth projections for renewable power demand
- Opportunities to acquire established assets with predictable returns
- Strategic repositioning by traditional energy companies
Market Outlook
Financial analysts suggest that while the 17% year-over-year decline is significant, the sequential improvement from late 2024 may indicate that the M&A market is finding its footing. The preference for larger, strategic deals could signal a more mature approach to corporate growth and consolidation.
Several factors will likely influence M&A activity through the remainder of 2025, including interest rate movements, inflation trends, and geopolitical developments. Companies with strong balance sheets may find opportunities to acquire valuable assets at favorable valuations if economic pressures continue.
The concentration of activity in the power sector, especially renewable energy, is expected to continue as the global energy transition accelerates. Other sectors showing resilience include technology, healthcare, and infrastructure, where strategic consolidation remains attractive despite broader economic headwinds.
As companies adapt to the changing economic landscape, M&A strategies will likely remain focused on transactions that offer clear competitive advantages, cost synergies, or access to new markets and technologies. This more disciplined approach may result in fewer but potentially more successful deals as 2025 progresses.
