Mergers and acquisitions (M&A) in the United States are expected to gain significant momentum in 2025, as outlined in PwC's latest report on the deals landscape. The consulting firm attributes the anticipated increase to favourable economic conditions, a shift in regulatory dynamics, and increased capital availability, creating an environment ripe for deal-making across sectors.

PwC highlights a resurgence of optimism in the M&A market following a period of subdued activity in 2023 and 2024. "The US M&A recovery will likely accelerate in 2025 as dealmakers digest the implications of a new regulatory regime, the Fed's interest rate pivot and other macroeconomic and geopolitical factors.," the report states.

The report attributes several factors to fuel the expected growth of M&A activity including stabilized interest rates, that is expected to reduce financing costs, making deals more attractive to investors. Apart from low interests, the need for business model reinvention and shifting regulatory priorities also are expected to propel M&A deals next year.

The report underscores the importance of using M&A as a catalyst for growth and the need for companies to justify their valuations, while cautiously considering the "inflection point for regulatory activity, and the impact of geopolitical unrest on cross-border deals" in 2025.

Challenges and Considerations

Despite the optimistic outlook, PwC warns of potential headwinds, including geopolitical uncertainties, inflationary pressures, and stricter regulatory scrutiny in some sectors. These factors could impact cross-border deals and influence the pace of recovery.

"Despite a clearer economic and policy outlook, dealmakers will need to navigate a complex environment shaped by the reversal of certain Biden-era reforms, geopolitical challenges and slowing macroeconomic growth," report noted. 

PwC also highlights the possible tariff wars, trade restrictions and security policies between countries that could render the domestic and international deal environment extremely volatile. The firm expects some industries such as oil and gas to benefit from the deregulation and policy shifts, while sectors like big tech may face more scrutiny.

"The incoming Trump administration is intent on shaking up the status quo, including nominating regulators with non-traditional backgrounds," the report pointed.

The report also emphasizes the importance of agility for dealmakers. Dealmakers who succeed will be those who prioritize agility and strategic focus," it advises.

The report also cautions on a valuation gap between buyers and sellers. According to the research despite corporate cash levels being near historic highs, the money is "often concentrated among the biggest players; potentially limiting volume in some industries. Finally, many companies so far have prioritized returning cash to shareholders or just sitting on it instead of investing in M&A."

PWC report also expects PE exits, IPO markets to boost deal activity as the firm's analysis of PitchBook Data reveals that "several thousand PE exits were delayed over the past two years. Some of these exits are more likely to happen now."

According to PwC analysis of S&P Global data, there were 9,780 deals for $1.05 trillion in the first 11 months of 2024. Both volume and value were up slightly compared to the same period a year ago, when there were 9,653 deals for $1.02 trillion. This growth is attributed to a combination of economic optimism and strategic shifts by multinational corporations to align with post-pandemic realities.

PwC's report concludes that the U.S. will remain a pivotal hub for deal-making, with innovation-led sectors driving the bulk of transactions. "The confluence of favourable economic indicators and strategic imperatives positions 2025 as a landmark year for M&A," it predicts.