After two years of doubts, mergers and acquisitions have been partially reactivated in 2024. The culmination of the aggressive interest rate increases by central banks and a new macroeconomic balance have been some of the keys that have justified a rebound in both the US and Europe. However, various analysts are pointing out that this year may have only been the preamble to a true operations ‘boom’ that will turn 2025 into the biggest milestone in all of history.
According to the 2025 European M&A Outlook report by international law firm CMS, almost two-thirds of dealmakers expect the level of M&A activity in Europe to increase in the next 12 months, including 20% who say it will increase significantly. In Europe and to a lesser extent the US, banking will be a key element that will define the market.
At least that is what Edmond Rothschild analysts think, who point out that “in a higher interest rate environmentbanks have generated a significant amount of surplus capital, ready to be used now” to strengthen themselves before an era of lower interest rates arrives again. For their part, “as the outlook for intermediation margins is less positive, banks are looking for lower capital-intensive, fee-generating businesses to diversify their revenue streams.”
This is being seen clearly already with operations that are on the table. In Spain itself, BBVA and Sabadell will enter the decisive battle to see if the merger is completed this year. On the other hand, Unicredit has first launched an assault on Commerzbank and subsequently pounced on its local rival in Italy, BPM. The latter, precisely, was in the middle of an assault on Anima and took part of Monte dei Paschi in Siena. This could be the prelude to multiple operations.
In fact, JP Morgan experts believe that there are four candidates to receive a takeover bid in the coming months. Firstly, the French banks Societe Generale and BCP, affected by the political crisis in their country and with their prices weighed down by its exposure to French bonds. Both will be found “cheap” and the North American firm believes that they can be a great opportunity. For its part, it also highlights the Dutch ABN Amro and even a giant like Standard Chartered among the opportunities.
Paul Gurzal, co-head of fixed income at Crédit Mutuel Asset Management comments that “Mergers and acquisitions processes are once again dominant in the European financial sector.” However, he points to the insurers. “We believe it may be Natixis and Generali’s turn to discuss a diffusion while Allianz appears to be willing to sell a minority stake in Allianz GI.” For their part, they point out that in the insurance sector they also see movements since “the insurer Aviva has presented an offer to take over Direct Line with a premium of 58%. In summary, Gurzal explains that “the race towards scale is accelerating in all segments of the European financial market.” , whether through pure operators or large banking and insurance companies.
“Reduced financing costs and pent-up demand should drive double-digit growth in operations”
Accenture points out in its latest report, published last week, that this movement goes beyond banking (and the financial sector). “It has been generated significant pent-up demand both in corporate buyers and among private equity firms.” A demand that was contained until now by macroeconomic fears. Now with less uncertainty “a general resurgence is expected as corporate restructurings (after a painful period) lead to a wave of corporate growth.
In that sense, this movement “will cause mergers and acquisitions to occupy a predominant place on corporate agendas.” Furthermore, as ECB interest rates go down Companies will see more opportunities to leverage themselves to buy in a context in which accelerating growth will be especially important.
For their part, Mirabaud points out that the fundamental factor is these interest rate cuts “reducing financing costs derived from the lowering of rates by the Federal Reserve and the ECB should boost venture capital companies, improving their ability to finance operations.” In that sense, although they do not give a specific figure, they assume that the growth of transactions “It will exceed double digits.” However, they emphasize that the US will be the great escape for a Trump much more open to business operations.
The US will be the great driver
“We believe that M&A activity will increase in 2025, driven by the aforementioned factors (interest rates and pent-up demand) and by the deregulation planned under the incoming Trump administration in the United States,” they comment from Mirabaud. “In addition, the promise of a business-friendly regulatory environment under Trump has boosted negotiators’ optimism,” the firm adds. “In that sense, we believe that they will take advantage reducing regulatory obstacles and more favorable policies (such as tax cuts that free up more capital for purchases).”
Fitch Ratings emphasizes that the US will be the great driver worldwide of this type of operations and, although they recognize the general movement of lower rates as the structural factor, they point to Trump as the great catalyst. “We see an acceleration in the merger market which comes from a more flexible cost of capital” but also “from a solid rating margin and more lax regulation with the new Government.” The agency points out that a good number of operations “have been stopped by Biden’s antitrust laws, something that could be reversed under the Trump administration.”
This is added to some companies that reach this mkey oment with the ‘full magazines’. “There is a lot of gunpowder for acquisitions since 51% of the qualified firms present a cushion of 0.5 times in leverage in their Ebitda,” according to our forecasts. This means that “with a greater margin of free cash flow, “accounts with the possibility of achieving debt that they can pay very quickly. Fitch’s aggregate free cash flow forecast is at 3.1% for 2025 but, excluding utilities this range rises to 4.3%.
Regarding possible sectors, they clearly point to healthcare, which during the Biden era “was subjected to powerful scrutiny that limited its ability to carry out mergers and acquisitions.” In that sense, it also warns that many industrial firms “have raised enough capital to grow through purchases“Although they believe that one of the greatest exponents of this dynamic may be oil, with the Permian Basin emerging as the background scenario for a true hunt for energy assets. “It (merger activity) had already been solid, but we believe that the “Businesses will now need even more than before to expand in size and scale, as well as extend their value chains to support a continued development strategy in the most profitable region, the Permian Basin.”
From ING they explain that “we predict that the levels of mergers and acquisitions will increase significantly in 2025, after relatively low levels in 2022, 2023 and 2024. We have recently observed that the levels in the US are trending upward, but they still remain at low levels” . With falling rates and greater access to financing, “mergers and acquisitions markets may continue to revive.” Economic concerns, “although still present, do not have as much impact at the moment as inflation-induced pressures, so risk appetite will increase.” Furthermore, “valuations have become more attractive and there are large amounts of ‘dry powder’ to put to work.”
Goldman: “There will be $325 billion in mergers in the US alone”
Goldman Sachs also published a report on the matter in which they argued that “As the US economy and corporate profits grow and financial conditions become relatively more flexible, our analysts expect greater M&A activity in 2025.” The North American firm stated that “renewed merger activity should be helped by the possibility of less regulation in certain industries during the incoming Republican administration.
In short, Goldman Sachs assumes that by next year more than 750 operations over $100 million will be completed, that is, an increase of 25% compared to this year. Furthermore, the firm defends that this will not only be a matter of the number of agreements, but also their value. David Kostin, the firm’s star analyst, points to a total expenditure of 325,000 million dollars only in the US, that is, 20% more than the previous year. “Total merger volume should increase by an even greater amount because high equity valuations make equity consideration an attractive alternative to cash,” Kostin explains.
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