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8 Key Insights from “Goldman Sachs’ 2025 M&A Outlook”

8 Key Insights from “Goldman Sachs’ 2025 M&A Outlook“

Introduction

The global M&A landscape is set for a dynamic shift in 2025 as key economic and regulatory barriers begin to ease. Goldman Sachs’ latest outlook highlights the significant opportunities and challenges that lie ahead for businesses, investors, and industries worldwide.

1. M&A Recovery and Growth Potential

Specific Changes:

  • Regulatory clarity: Reduced uncertainty around U.S. and European antitrust laws, which had previously delayed or blocked large M&A deals.
  • Monetary policy stabilization: Interest rate hikes slowed in late 2024, lowering the cost of borrowing for M&A financing.
  • Shift in sentiment: Nearly 60% of private corporates surveyed by Goldman Sachs indicated a renewed focus on growth strategies, such as acquiring high-growth companies in tech, healthcare, and clean energy.

Example: In 2024, Pfizer and Seagen completed a $43B acquisition deal after regulatory delays due to antitrust concerns.

2. Drivers of M&A

Specific Changes:

  • Strategic Growth: Companies are expanding into adjacent markets. For instance, non-technology companies are acquiring tech firms to integrate advanced digital solutions into their operations.
  • Capability Enhancement: Firms are acquiring startups or smaller companies with expertise in AI, automation, and clean energy technologies.

Example: In 2024, Chevron acquired renewable energy firm Renewable Energy Group to expand its low-carbon fuel capabilities.

3. Cross-Border M&A Surge

Specific Changes:

  • U.S.-Europe Transactions: Cross-border deal volume between the U.S. and Europe surged 44% in 2024 due to more favorable trade policies and currency exchange rates.
  • India and Japan’s Momentum: Japan experienced a 30% YoY growth in M&A due to new corporate governance reforms. India saw large multinational investments thanks to its favorable tax policies and high GDP growth.

Example: British company DS Smith proposed a $9.8B sale to U.S.-based International Paper Co., and Reliance Industries merged its Indian media assets with Disney for $8.5B.

4. Corporate Simplification

Specific Changes:

  • Large Spin-Offs: More companies are breaking up conglomerates to streamline operations. In 2024, 3M spun off its healthcare division into Solventum Corporation, a $20B standalone company, to better allocate capital and focus on healthcare innovation.
  • Geographic Separations: Corporates are shifting their headquarters or listings to regions with more favorable tax laws or regulatory environments (e.g., from the U.S. to EMEA).

Example: Anglo American divested its Australian coal portfolio for $4.9B to focus on low-carbon mining.

5. Sponsor Activity

Specific Changes:

  • Take-Private Transactions: Sponsors are leveraging low valuations to acquire public companies and delist them. Take-private activity in EMEA increased 34% YoY, with a notable 84% surge in the UK’s tech sector.
  • Continuation Funds: Sponsors are rolling over assets from older funds to new ones, allowing them to extend investment timelines and generate returns for investors.

Example: Blackstone acquired AirTrunk, APAC’s largest data center platform, leveraging its dry powder reserves.

6. Sector Highlights

Specific Changes:

  • Technology: Companies are acquiring software firms specializing in AI, cybersecurity, and cloud computing.
  • Healthcare: Focus on acquiring firms with innovative biotech solutions and medical devices.
  • Financials: Banks and fintech companies are targeting startups to enhance digital banking services and streamline payment systems.

Example: Siemens announced plans to acquire Altair, a leader in computational intelligence, to improve its AI-driven automation offerings.

7. Activism in M&A

Specific Changes:

  • Portfolio Simplifications: Activist investors are pressuring companies to sell non-core assets to unlock value. For example, they target businesses with undervalued divisions and push for spin-offs to highlight hidden value.
  • Larger Targets: In 2024, nearly one-third of activist campaigns targeted $10B+ corporations, compared to smaller targets in previous years.

Example: Elliott Management led a campaign to push Salesforce into cutting costs and selling off underperforming units.

8. AI-Driven M&A

Specific Changes:

  • Infrastructure Investments: Companies are buying data center operators to handle the growing computing demands of AI.
  • Platform Consolidation: Firms like Salesforce and IBM are acquiring smaller companies to integrate AI capabilities into enterprise solutions.
  • Application-Level AI: Businesses are acquiring companies with “killer apps” (e.g., chatbots, automated data processing) that can transform industries.

Example: Advanced Micro Devices (AMD) announced its acquisition of ZT Systems to bolster system-level design capabilities for its AI products.

References

Click to access report.pdf

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