Global M&A Trends in Q1 2025 & Trade Talks

The global mergers and acquisitions (M&A) landscape in Q1 2025 showcased a dynamic mix of resilience, sector-specific momentum, and geopolitical challenges. With deal value reaching $1,050.8 billion across 12,371 transactions, the quarter marked a robust start to the year, driven by large-scale transactions and sector-specific activity.

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However, persistent recession risks, tariff uncertainties, and market volatility cast a shadow over the outlook for the remainder of the year. This blog explores key trends, sector highlights, and notable deals shaping the global M&A market in Q1 2025.

GLOBAL M&A OVERVIEW

The first quarter of 2025 saw a strong rebound in deal value, with North America dominating the leaderboard, accounting for 80% of the top 10 deals. Asia and Central America also contributed notable transactions, including the geopolitically significant Panama Ports deal. Despite the optimism, the market remains cautious due to elevated interest rates, geopolitical tensions, and ongoing trade volatility.

Valuation metrics indicate a stable recovery, with median enterprise value (EV)/EBITDA multiples holding steady at 9.6x, nearly flat compared to 2024’s 9.7x. Similarly, EV/revenue multiples remained consistent at 1.6x, signaling a normalization of valuations to pre-pandemic levels. However, these metrics are still below their 2021 peaks, reflecting the impact of higher interest rates.

SECTOR HIGHLIGHTS

IT Sector Leading the Charge

The IT sector emerged as the strongest performer in Q1 2025, with deal value reaching $230 billion across 2,014 transactions. This marked a 71.2% year-over-year increase, driven by megadeals in cybersecurity and social media for AI training. Alphabet’s $32 billion acquisition of Wiz, a cloud security innovator, exemplified the sector’s focus on addressing modern cybersecurity challenges. Crown Castle’s $8.5 billion divestiture of its small cells and fiber solutions businesses further highlighted strategic repositioning within the sector.

The IT sector’s deal momentum score surged to 1.23, the highest among all sectors, reflecting sustained demand and improved valuation metrics. Despite potential threats of digital service tariffs, the sector’s adaptability and resilience are expected to sustain dealmaking activity throughout the year.

The Healthcare Sector’s Mixed Momentum

Healthcare accounted for 10.7% of global deal value in Q1, totaling $112.6 billion across 986 transactions. While the sector’s contribution to deal value increased, deal activity was heavily front-loaded, with market sentiment weakening as the quarter progressed. Johnson & Johnson’s $15 billion acquisition of Intra-Cellular Therapies stood out as the largest healthcare deal, followed by Stryker’s acquisition of Inari Medical.

Medtech saw a resurgence, with Boston Scientific leading the charge through acquisitions and strategic investments. Digital health also witnessed creative consolidation, as Transcarent acquired Accolade in a unique VC-backed transaction. However, tariff-related uncertainties are likely to dampen healthcare deal momentum in Q2.

Energy Sector Drives Activity

The energy sector recorded 327 deals worth $89.5 billion, with clean energy accounting for the largest transactions. Constellation Energy’s $26.6 billion acquisition of Calpine created the US’ largest clean energy provider, while Innergex Renewable Energy was taken private by CDPQ for $10 billion. These deals underscore the sector’s focus on sustainability and diversification amid volatile oil prices.

Carveouts also played a significant role, with Eversource Energy and National Grid divesting non-core assets to streamline operations. Despite market uncertainty, the energy sector remains poised for further M&A activity, particularly in renewable energy.

B2B Sector Resilience Amid Uncertainty

The B2B sector maintained healthy M&A activity, with 4,292 deals worth $260.6 billion. Megadeals, including BlackRock’s $22.8 billion acquisition of Panama Ports, showcased the sector’s ability to navigate geopolitical tensions and rising materials costs. The aerospace and defense industry, heavily reliant on imported materials, faces challenges from tariff-related uncertainties.

Sponsor-backed activity remained strong, with Clearlake Capital Group’s $7.7 billion take-private of Dun & Bradstreet highlighting the sector’s adaptability. However, Q2 is expected to see a slowdown as market uncertainty intensifies.

B2C Sector Consumer Strength Supports Activity

The B2C sector recorded 2,299 deals worth $162 billion, driven by elevated consumer confidence and strategic M&A activity. Sycamore Partners’ $23.7 billion acquisition of Walgreens Boots Alliance marked one of the largest PE-backed take-private deals in recent years. The consumer nondurable subsector also saw significant activity, with Prosus acquiring Just Eat Takeaway.com for €4.1 billion and PepsiCo acquiring poppi for $1.7 billion.

While tariffs may impact consumer spending, M&A remains a critical strategy for growth and supply chain adjustments. The sector’s resilience and ability to capitalize on popular brands make it an attractive option for investors.

Materials & Resources Sector’s Return to Normalcy

After a record-breaking Q4 2024, the materials & resources sector saw a return to normalcy in Q1, with 371 deals worth $42.5 billion. The chemicals & gases subsector led activity, with WE Soda’s $1.4 billion acquisition of Genesis Alkali and Sherwin-Williams’ $1.2 billion acquisition of BASF’s Brazilian Architectural Paints Business. The container and packaging industry also saw notable deals, including ADNOC and OMV’s merger to create a $60 billion chemical business.

Tariff-related uncertainties may impact the sector, leading to higher costs for imported materials and a potential slowdown in deal activity.

Slower Start in the Financial Services Sector

The financial services sector recorded 833 deals worth $99.2 billion, falling short of 2024’s activity levels. Asset manager consolidation continued, with Ares Management acquiring GCP International and Apollo acquiring Bridge Investment Group. Rocket Companies also made headlines with its acquisitions of Mr. Cooper Group and Redfin, boosting its mortgage and real estate businesses.

Market volatility and valuation challenges may impact the sector’s M&A activity in the coming quarters, but consolidation trends are expected to persist.

Geopolitical and Regulatory Challenges

Geopolitical tensions and regulatory complexities remain key challenges for the global M&A market. President Trump’s tariff announcements in April have introduced uncertainty, particularly for sectors reliant on cross-border trade. The Panama Ports deal exemplifies the impact of geopolitical considerations, with delays stemming from audits and regulatory reviews.

Antitrust scrutiny also continues to shape the M&A landscape, with several high-profile deals facing regulatory hurdles. For example, the DOJ’s mediation with UnitedHealth Group and Amedisys highlights the complexities of navigating antitrust concerns.

OUTLOOK FOR THE NEXT QUARTER OF 2025

Impact of U.S.-China Positive Talks in Geneva on M&A

The U.S. and China concluded high-level trade talks in Geneva with a constructive tone, announcing a temporary but significant rollback of tariffs for an initial 90-day period and the establishment of a new economic dialogue mechanism. Both sides characterized the discussions as yielding "substantial progress" and "important consensus," though specific details are pending a joint statement.

As of this posting, the immediate effects on M&A activity can be broken down into four main considerations.

First, we have a reduction in uncertainty. The de-escalation of the trade conflict and temporary suspension of most tariffs directly reduce one of the largest sources of uncertainty for domestic and cross-border dealmakers. This clarity is likely to encourage both U.S. and companies abroad to re-engage in M&A activity that had been stalled or abandoned due to tariff risks and unpredictable regulatory environments.

Further, we suddenly have cause for market optimism and corresponding valuations. The positive market reaction evidenced by rising futures and gains in global equities suggests restored investor confidence, which can support higher valuations and more favorable deal terms. This is particularly relevant for sectors heavily exposed to U.S.-China trade, such as technology, industrials, and consumer goods.

With tariffs temporarily reduced and a new consultation framework in place, companies may resume or accelerate M&A, especially in industries where supply chains had been disrupted or where strategic partnerships had been put on hold due to trade tensions. We have firsthand evidence related to a current client of such pauses at Encore AMC.

Finally, while optimism is warranted, dealmakers will remain cautious. The phone calls we participated in, within our network following the announcements, confirm this. The temporary nature of the tariff suspension and ongoing negotiations mean that robust due diligence-particularly on supply chain exposure and regulatory risks will remain a priority in M&A processes. While there is an argument that can be made that "we’re in this place as a byproduct of self-inflicted wounds," we maintain there is no denying there is room for optimism.

FINAL TAKE

The 90-day suspension is a window, not a resolution. If substantive progress is not made, tariffs could return, reintroducing uncertainty and potentially causing deal delays or renegotiations. The talks have not yet addressed deeper issues such as intellectual property, forced technology transfer, or broader market access, which could limit the scope of long-term M&A recovery – so dealmakers will need to closely monitor the evolving policy landscape and be prepared to adjust strategies as more details emerge and as the consultation mechanism is tested in practice.

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Othon "O" Herrera

Othon ‘O’ Herrera has established a consistent record of strong returns over multiple business cycles at the C-level, across a range of industries for companies with up to $625 million in revenue, including navigating complex situations such as those requiring performance improvement, M&A, international expansion, turnaround, and transformation.

He has led M&A as a private equity backed consolidator leading to value creating exits for investors and shareholders. He founded Encore AMC taking the best investment banking practices from M&A firms he has hired throughout his career.

At Encore, Othon chairs the firm’s deal committee, while maintaining a direct presence on all the firm’s deal teams and transactions.