2025 M&A Outlook: Economy and Dealflow

The M&A landscape continues to evolve, shaped by shifting economic conditions, a new political regime and dynamic corporate strategies. As we move into the new year, Mergers & Acquisitions presents a week-long special series: The 2025 M&A Outlook. In it, we gather insights from dealmakers across all corners of the M&A world to explore key trends, emerging opportunities and potential challenges that will define the dealmaking environment in the coming year. 

Today, we speak to notable executives about their outlook on dealflow and the economy in the year ahead. While some see signs of resilience bolstered by improving inflation trends and investor eagerness, others note persistent risks.

What is your outlook on the economy for 2025?

James Bardenwerper, Director, Configure Partners: Outlook is cautiously optimistic. While the Fed has seemingly engineered a soft landing, the U.S. economy is not fully out of the woods and remains susceptible to varying economic factors. A downward revision in jobs data was quickly cast aside in this furious election cycle and domestic manufacturing data has continually softened over the last several months. Meanwhile abroad, a slowdown in China presents potential headwinds and unrest in the Middle East could spill over to a more all-encompassing conflict. On a more positive note, investors are eager to extend capital after nearly two years of limited dealmaking and a lull in deployment.

Jackie Cohen, M&A Partner, Ropes & Gray:
I think the economic outlook for 2025 remains strong. The U.S. economy has shown resilience in the face of economic and geopolitical headwinds over the past two years, and macroeconomic constraints (like inflation and elevated interest rates) are trending in the right directions. Initial market reactions to the U.S. presidential election have shown optimism for business-friendly policies under the Trump administration, including tax cuts and a less aggressive posture on regulatory intervention.

Brian Dudley, Partner, Growth Equity, Adams Street Partners: The base-case outlook for the U.S. economy in 2025 is cautiously bright. The Fed’s dual mandates to keep inflation in check and the labor market humming are within reach. Though inflation is still above the Fed’s two percent target, both metrics are now well within, or below, the historic normal range going back to the ‘50s. Furthermore, growth and productivity could be spurred with continued innovation in sectors like AI, renewable energy and biotechnology. Despite persistent concerns surrounding the durability of growth and interest rate policy, the U.S. economy remains fundamentally strong.

Lee Mlotek, Managing Director, Monomoy Capital Partners: Our outlook on the 2025 economy is that it will effectively be consistent with what we experienced in 2024. The high level of uncertainty in the economy continues to delay the capex, investment and hiring decisions needed to push the economy back into growth mode.

Frank Mountcastle, Head of M&A, Harris Williams: We believe the global economy should continue to steadily improve in 2025. In 2024, we’ve seen improvement in the rate environment, generally strong consumer spending and financial health, good GDP growth, and solid corporate earnings and margins. While there have been some exceptions to this overall strengthening, the economy has been quite resilient, and barring any major disruptions, we think 2025 should see this broad recovery continue.

What is your outlook for M&A in 2025?

Lee Mlotek, Managing Director, Monomoy Capital Partners: We remain cautiously optimistic that 2025 will bring strong dealflow, supported by recent macro developments, such as anticipated interest rate reductions and a growing need for liquidity events. Market intelligence indicates that increased pitch activity and robust bank backlogs align with the expectation of improved deal volume and quality. However, we anticipate that deal activity may be more concentrated in the latter half of the year, as businesses aim to showcase improved performance against prior periods.

Frank Mountcastle, Head of M&A, Harris Williams: As private equity sellers accept that they must begin to sell assets and generate liquidity, valuation gaps in certain industry sectors should shrink and become less of a governor to dealflow. This should encourage company founders to get off the sidelines and transact. And while the Fed’s rate path going forward is uncertain, the consensus view is that rates will either stay flat or fall further in the months to come. While more rate cuts would certainly produce an element of momentum, they are not necessary for M&A to rebound. Most investors have already priced in the cost of capital, and we have been in a higher rate environment now for a couple of years.

Ben Jackson, Director, Capital Markets, Leste Group: Specifically, in the real estate sector, I anticipate a rise in M&A activity in 2025. Companies are likely to seize emerging opportunities as they arise. Although elevated interest rates have presented challenges, there is optimism that potential rate cuts from central banks will foster a more favorable environment for transactions. As borrowing costs decline, more investors may feel encouraged to pursue acquisitions. Additionally, as the market stabilizes, there will be opportunities to acquire distressed assets at attractive prices, appealing to opportunistic investors looking to take advantage of lower valuations.

Jeff Jacobs, Head of M&A and COO of Investment Banking, Solomon Partners: Lower borrowing costs will spur private equity to ramp up M&A activity. Financial sponsors have mostly been on the sidelines, sitting on record amounts of dry powder as they waited out a market challenged by unfavorable bid-ask spreads and prohibitive financing costs. We expect the tide to turn in 2025, as aging portfolios and pressure from LPs push PE firms to re-enter the market.