The markets in 2025

Market forces are likely to continue to change into next year and dealmakers need to be ready, says Merlin Piscitelli

With elevated wage costs and tax changes, business sentiment has sunk to an all-time low, following the Autumn Budget. But while confidence in growth under a Labour government appears weak, one industry that is booming is mergers and acquisitions (M&A).

There has been a flurry of UK M&A activity this year, making the country the most active hub in Europe.

The value of mergers and acquisitions involving UK companies, whether buying or selling, has increased by 57 per cent to $306bn compared to same period last year. This outstrips the rest of Europe, including Germany ($143bn) France ($142bn) and Italy ($91bn), since the beginning of the year.

M&A boom or potential bubble?

Deal activity on Datasite, which annually facilitates about 15,000 new deals, also support this, with US and EMEA transaction markets are up, though APAC is down. The increase is largely being driven by technology, media and telecommunications (TMT) and healthcare, following post-election regulatory clarity, tech innovation, and medtech investments. Consumer M&A is also seeing momentum, buoyed by wellness and e-commerce growth.

It may be too early to tell if these are long-term trends and there are some regional differences but behind the increase in activity. For instance, in the US, the new administration’s promises on deregulation and business friendly policies can act as drivers. Whereas, in the UK, with business confidence in mind and a sea of tax changes, companies could be using mergers as a life raft. By consolidating operations, businesses can cut down on individual costs and reduce competition in industries, by combining expertise.

Nonetheless, M&A is up, and pipelines are stable, especially compared to this time last year. Global deal kick-offs on Datasite increased 17 per cent in the first half of this year. Since these are deals at inception rather than announced, it gives a good indication of what’s ahead.

The IPO outlook

Yet, while the future may look bright for M&A, the outlook for initial public offerings (IPOs) remains bleak.

Earlier in the year, The London Stock Exchange fell out of the top 20 global IPO destinations of 2024, having raised only as much money as Kazakhstan’s stock market.

This year’s reforms were designed to rekindle activity after a prolonged decline in the number of UK listed companies and a move in IPOs to the US. The shift to more disclosure-based, rather than rules-based requirement, which streamline the entire process to make London more attractive to a wider range of companies considering listing, aligned with successful strategies in other major markets, especially the US.

Still, regulatory changes alone may not fully revitalise London’s IPO market. Other factors, such as market stability, political certainty, and the overall business environment play a crucial role and must be approached holistically. Additionally, attracting and retaining talent in the financial services sector must play a role in the government’s approach.

Looking ahead

With proposals on EU consolidation and potential increased tariffs by the US, market forces are likely to continue to change into next year. And though initial data suggests M&A volatility, government measures may still have an impact. UK IPOs in 2025 could return as many businesses may deliberately time their new listing for early in the year, once the new market environment has been assessed and conditions are relatively more stable.

As such, dealmakers need to be ready. By focusing on thorough due diligence and leveraging new technologies to help manage their capital transactions, dealmakers thrive.

Merlin Piscitelli, Datasite EMEA Chief Revenue Officer