What’s Driving the Surge in Deal-Making?

2025 M&A Market Performance

• The number of transactions exceeding $10 billion increased 100% compared to 2024.
• Transaction activity in the last three months of 2025 rivaled the peak volume seen in 2021.
• Mega-transaction volume (deal sizes $500 million and up) rose between 20% and 30% for the year.
• Activity surged in May and June following a quiet Q1 and an April slowdown triggered by post-election tariff uncertainty ("Liberation Day").
• The current year is characterized as one of the most active periods in Goldman Sachs' recorded history despite significant headwinds.

Drivers of Resilience

• Strategic imperatives repositioned for 20–30 year horizons, delayed by the previous four to five years, are now being prioritized by boards and shareholders.
• Capital markets widened significantly in the second half of 2025, restoring access to public and private credit and equity financing.
• Regulatory and geopolitical complexities were successfully navigated, allowing for the completion of complex cross-border and "insensitive" industry deals.
• "Fingers have met" regarding the convergence of seller receptivity, buyer aggressiveness, and viable financing options.

Sector and Geographic Trends

• Technology & AI: Consolidation is active not only within pure-play AI companies but across the entire "AI universe," including software, real estate, data centers, semiconductors, and power suppliers.
• Biotech & Pharma: Large-cap pharmaceutical firms continue acquiring to secure next-generation molecules.
• Traditional Sectors: Activity is broad-based, including industrial companies, consumer retail, and financial institutions in Europe.
• Europe: The European market has been described as "extraordinarily active."
• Americas: Remains the largest M&A market globally.

Boardroom Dynamics and Strategy

• AI presents a unique decision-making challenge due to a lack of historical boardroom expertise, despite its seismic potential impact.
• CEOs are pursuing scale and diversification to maintain "cards in the deck," aiming for flexibility and nimbleness in an uncertain AI landscape.
• Portfolio simplification remains a core strategy to eliminate conglomerate discounts and address shareholder activism.
• Shareholder activism is at a five-year high, with traditional institutional investors becoming increasingly vocal regarding portfolio composition.

Private Markets and Capital Availability

• Private equity participation remains between 30% and 40% of the total M&A market, currently in the "second or third inning" of a recovery cycle.
• Recovery drivers include the monetization of thousands of existing portfolio companies and continued investment from funds.
• Private capital has expanded beyond traditional funds to include sovereign funds, large family offices, and massive private credit pools.
• There is currently no shortage of capital for viable transactions in either public or private markets.

2026 Outlook and Risks

• Goldman Sachs is "reasonably but cautiously bullish" on 2026, expecting activity levels to remain at or near all-time highs.
• Forward-looking indicators show new deal mandates running at 2021 levels or higher.
• Strategic drivers (capital availability, repositioning needs, and regulatory execution) are expected to persist into the next year.
• Potential derailment factors:
  • Geopolitical instability, particularly affecting cross-border deals which have not yet fully recovered.
  • Tightening of credit markets or idiosyncratic credit issues in financial services or industrials.
  • Evolution of private credit scales through a credit cycle.
• Current M&A volume as a percentage of GDP remains below historical averages, suggesting capacity for further growth.