The global M&A market witnessed a robust resurgence in 2024, overcoming challenges posed by geopolitical tensions, inflationary pressures and expanding antitrust, foreign investment and export regimes.

Global M&A deal value in 2024 rose significantly, from 8% to $3.4tn out of the lows of 2023. While overall deal count fell, the number of large deals grew. (Mergermarket) The number of $2bn+ deals increased 20% year-over-year. (Note also the pending $40bn Mars acquisition of Kellanova, and the $35bn Synopsys acquisition of Ansys.) (MoFo Tech M&A Survey)

Two major driving M&A growth: interest rate cuts, high levels of PE dry powder.

M&A activity in Europe, the Middle East and Africa (EMEA) recovered healthily. Each of Q1-Q3 showed 10% increase in deal value year-on-year to $840bn. (Ibid) Deals involving financial sponsors rose 36% in value, with take-private transactions in Europe surging to a record 95 deals. (Mergermarket)

The expectation is that this trend continues in 2025, and builds, as further rate cuts globally and pressure on PE funds to deploy record levels of dry powder creates the perfect storm for heightened M&A activity.

Continued Dominance of Tech in M&A

Within this global resurgence, the technology sector stood out, accounting for $640bn in deal activity. There is no obvious challenger to Tech’s top position, which accounted for 18% of potential deals in 2024 and saw a 29% year-on-year Q3 value increase. (Cook, Slaughter and May)

The sector’s growth trajectory is set to persist. Dealmakers continue to exhibit strong enthusiasm for AI and machine learning technologies, and it is likely these areas will present the greatest M&A opportunities over the next 12 months. (MoFo Tech Survey) Notably, cybersecurity has surpassed AI as the top subsector of focus within Tech M&A itself. (Ibid). Risk-mitigation has been flagged as a top priority for those involved in tech transactions.

Software subsector

The software subsector is likely to remain the cornerstone of tech M&A, having accounted for 80% of deal value in the first three quarters of 2024. (Slaughter and May Horizon Scanning) With the proliferation of AI-powered solutions and digital transformation initiatives, software companies in high-growth areas like business services and e-commerce will continue to attract robust interest.

Notable too is the trend of "reverse" acqui-hires—where companies selectively hire target employees and license their software—is gaining traction, as exemplified by Amazon’s 2024 deal with AI robotics startup Covariant. Instead of buying Covariant outright, Amazon selectively hired employees and licenced its software.

Private equity

Private equity activity resurged in 2024, fuelled by both anticipated and actual interest rate cuts. The outlook for 2025 is optimistic. A transaction-friendly administration in the US paired with 18 months of pent-up demand will likely lead to a healthy market. PE firms hold $4.5tn of unspent capital as mid-2024 and are facing mounting pressure to deploy these funds effectively, especially as quality assets enter the market.

However, though there is a more lenient regularity environment for M&A activity at the federal level in the US, at the state level, ‘roll up’ or ‘aggregator’ strategies will continue to be received aggressively by regularity authorities. (Though enforcement actions are vulnerable objection, see Welsh Carson’s dismissal of the claim in connection with its investment in US Aesthesia Partners).

PE firms are increasingly considering minority investments as part of their strategies. (80% indicated plans to pursue minority stakes in 2025). This approach aligns with the trend of partial investments observed in 2024, including Bharti Global’s £3.6 billion acquisition of a 24.5% stake in UK telecom giant BT.

The PE-backed take-private trend held steady in 2024. More attractive valuations, and higher compliance and corporate governance costs of remaining private contributed to this. Common challenges will persist into 2025, including an increased risk of losing a deal at the last minute to a bidder with a superior offer, with strategic acquirers expected to become more active. (MoFo Tech Survey)

Regulatory Challenges and Opportunities

Regulatory scrutiny will continue to influence tech M&A dynamics in 2025. In Europe, the Digital Markets Act, and the UK’s Digital Markets, Competition and Consumers Act expand authorities’ powers to review large tech transactions. However, there are signs of potential flexibility. For instance, UK’s Competition and Markets Authority (CMA) cleared the £15 billion Vodafone/Three telecoms merger with behavioural remedies, and its 2025 review of merger remedies may introduce more accommodating approaches.

The introduction of an “innovation defence” for certain mergers in the EU, as suggested by Mario Draghi, could further shift the regulatory landscape. Dealmakers are expected to mitigate regulatory risks through contractual protections like reverse break fees and “hell or high water” clauses, ensuring compliance while advancing transactions.

AI’s Central Role in Deal Activity

Artificial intelligence underscored many of 2024’s largest tech deals, and this momentum is set to accelerate in 2025. The volume of AI-related M&A grew by 33% year-on-year in 2024, outpacing overall tech deal growth. As new AI use cases emerge, sectors such as data centres, business services, and e-commerce will see heightened M&A interest.

The EU’s AI Act, which comes into effect on February 2, 2025, will introduce compliance requirements for AI systems marketed or used within the EU. Its stringent penalties—up to 7% of global turnover or €35 million—underscore the importance of regulatory diligence in AI M&A. Buyers are expected to prioritize compliance warranties, indemnities, and conditions precedent to address these risks during due diligence and negotiation processes.

Outlook for 2025

With global interest rates easing, inflationary pressures receding, and equity markets stabilizing, sentiment in the tech M&A market is optimistic for 2025. The convergence of private equity interest, corporate growth strategies, and advancements in AI and other technologies creates a fertile environment for dealmaking. However, geopolitical tensions and regulatory developments will require dealmakers to remain vigilant and adaptive.

As tech continues to redefine industries and drive innovation, M&A activity in the sector will play a pivotal role in shaping the business landscape of 2025 and beyond.