2025 H2 M&A Forecast: Cautious Optimism Amid Uncertainty

Following a promising start to 2025, hopes of a resurgence in M&A activity this year were dashed early in the second quarter with the U.S. administration’s abrupt announcement of broad tariffs, marking a major escalation in global trade tensions. However, according to Norton Rose Fulbright and Mergermarket’s latest global M&A trends and risks report, the survey of 200 of the most senior leading executives shows that, despite the uncertainty, nearly one-third of respondents say that their M&A appetite has either stayed the same or even increased somewhat.

The report highlights signs of cautious optimism noting that private equity is ready to put dry powder to work and that this challenging environment could decrease competition for attractive targets and potentially lower valuations. As certain regions in North America have become less attractive amid market volatility, stronger M&A activity is expected in Europe, East Asia and Australia, highlighting regional variations in market sentiment.

While the M&A outlook remains uncertain, the survey shows that dealmakers are responding with prudence, pragmatism and patience as they prepare to seize the opportunities that lie ahead.  Medium to long term prospects for dealmaking look positive as challenging dynamics will require companies to adapt and one part of that will involve a vibrant M&A strategy.

M&A market faces setbacks as tariffs trigger strategic reassessment and delays

The far-reaching reciprocal tariffs announced by the US administration had a chilling effect on M&A globally. The move startled the market, with many M&A deals being postponed pending greater clarity in the dealmaking environment. Some deals in progress stalled, while others have come to a complete halt as parties reassess the implications of tariffs on their deals.

Our initial survey, conducted prior to the April 2nd tariff announcement, reflected a bullish sentiment, with 53 percent of respondents expecting their M&A appetite to increase in 2025. In response to a follow-up query on the same topic after the announcement, 67 percent of respondents said the tariff-related turbulence and escalation in trade tensions caused their appetite for M&A to decrease. In the US, survey participants responded that tariffs, new products/services, private equity (PE) dry powder and supply chain disruption will be the four most important drivers of M&A in 2025.

Among those still pursuing new M&A transactions, there is a noticeable shift toward lower-risk acquisitions, such as domestic deals instead of cross-border transactions and toward industries less vulnerable to tariff uncertainty, like technology and healthcare transactions. Others see the turmoil as an opportunity to snap up a bargain and seize attractive targets at a lower valuation, as competitors retreat from doing deals. Ultimately, while tariffs present short-term challenges, many dealmakers are focused on long-term value creation and have a favorable outlook on M&A activity.

Private equity ready to put dry powder to work

The survey indicates that respondents believe that PE dry powder will be the second most important driver of M&A activity in 2025, as a global baseline. In every region, other than South and Southeast Asia, Africa and Latin America, respondents rank PE dry powder in the top four most important drivers of M&A activity in 2025.

In addition, survey participants expect domestic PE buyers to be among the most active types of acquirers in deal markets in 2025 (cited by 44 percent, taking our global baseline). Their presence will be felt across all markets, according to our respondents, with a particular emphasis on South and Southeast Asia (49 percent). Their international PE peers, meanwhile, are expected to be especially active in neighboring East Asia (41 percent), as well as Europe (also 41 percent) and Australia and New Zealand (43 percent).

Dealmakers move quickly to integrate AI

AI has rapidly evolved into a transformative force within the M&A landscape, simultaneously creating highly sought-after acquisition targets and equipping in-house deal teams with increasingly resourceful tools. In 2025, technology related enterprises began to offer some of the most attractive deal opportunities, including the following subsectors: cybersecurity, data analytics and especially AI. Over half of survey participants (51 percent) have acquired an AI business, with respondents applying the technology to various parts of their M&A processes, from deal sourcing to due diligence. Moreover, 46 percent report that they are looking to acquire an AI business in the near term. Both of these figures speak to the rapid adoption of this transformative technology in a short period of time. In our previous 2024 study, just 33 percent of respondents said they were looking to acquire an AI business.

In addition to acquiring AI targets, companies are deploying AI to bolster their own in-house dealmaking processes. Approximately 77 percent of respondents have responded that they have recently either partnered with AI vendors or procured services from an AI provider. AI technology has become a vital tool for many businesses to support their M&A processes. The technology is currently being used in financial analysis and valuation modeling, along with being used in M&A documentations. And, approximately 63 percent of respondents are using AI to improve M&A due diligence.

Popularity of deal insurance set to soar

Representations and warranties insurance (RWI), also referred to as warranty and indemnity insurance, continues to accelerate as businesses offset risk in an increasingly uncertain dealmaking environment. RWI is expected to increase in 2025 compared to 2024 across all international markets, as nearly two-thirds of the respondents note that they expect that RWI will increase this year in all regions, including 37 percent who expect that increase to be significant (up from 26 percent in our previous study). Particularly, respondents expect that RWI will be used more in deals involving industrial assets, life sciences and healthcare, and technology. With the maturity of the RWI market, M&A dealmakers can expect to see a global increase in carriers that will likely make rates and terms more competitive.

Read the full M&A trends and risks report.