European and US M&A conditions are becoming more favourable in 2025, though macroeconomic and geopolitical uncertainty continues to weigh on dealmaking, according to growth strategy consultancy CIL.
Early indicators point to a long-awaited recovery, with European quarterly deal volumes rebounding to 2021 levels in 2024. The US also saw improvement, though at a more measured pace.
Meanwhile, dry powder levels declined marginally, reflecting lower fundraising activity amid the already high levels of capital awaiting deployment.
While interest rate cuts have continued, persistently high inflation in the UK and US, coupled with the potential inflationary impact of US trade tariffs and retaliatory measures, could slow the pace of further reductions. Despite rates remaining elevated versus post-GFC levels, eventual cuts are expected to improve financing conditions, bolster investor confidence, and drive deal activity – though the exact timeline remains uncertain.
Global growth is forecast for 2025, but expectations have already been revised downward. The OECD recently downgraded its outlook, citing potential headwinds from US trade tariffs under President Donald Trump, which are likely to dampen global GDP growth by raising trade barriers, disrupting international trade flows, and heightening policy uncertainty, affecting consumer confidence and investor sentiment.
Political risk remains high, particularly surrounding the Russo-Ukrainian war, though increased European defence spending could create opportunities. This week, Germany approved a major increase in defence and infrastructure spending, a move that could unlock investment opportunities in select sectors.
