M&A deals exceed expectations, ending seven-quarter losing streak

In the first quarter of 2025, companies engaging in mergers and acquisitions achieved better returns compared to the broader market, showing a positive trend for the first time since late 2022. This conclusion comes from the latest Quarterly Deal Performance Monitor (QDPM) by WTW, which assessed completed M&A transactions with a value exceeding $100 million within the January to March period.

Researchers connected with the M&A Research Centre at Bayes Business School analyzed share price performance of these deals to arrive at these findings. This shift towards favorable outcomes for acquirers signals a change after seven consecutive quarters of underperformance. Historical data since the global financial crisis suggests that M&A transactions have generally outperformed the market by about one percentage point.

Looking regionally reveals varying performance across different markets. North American acquirers, with 81 deals, underperformed their regional index by 2.2 percentage points in the first quarter, continuing a negative streak for the ninth consecutive quarter. Conversely, European acquirers outperformed their index by an impressive 16 percentage points despite a reduction in deal count from 42 in the last quarter to 29. The UK-based acquirers followed the same positive trajectory. In the Asia-Pacific region, dealmakers exceeded their regional index by 5.8 percentage points with 44 concluded transactions, down from 61 the previous quarter.
Meanwhile, Jana Mercereau, WTW’s head of Europe M&A Consulting, shared that while 2025 began positively, ongoing geopolitical tensions and new US tariffs stand as potential influencers on M&A activities in the near future.

The implementation of tariffs has introduced new factors influencing market volatility and economic uncertainty, leading to a more cautious atmosphere for companies considering M&A operations. For instance, a rise in global M&A volume by 12.6% to $984.38 billion was driven by activity in the Asia Pacific region, particularly in China, despite a 13% drop to $436.56 billion in the US due to unpredictable trade policies causing hesitation among companies engaging in significant deals.

Despite these challenges, tariffs have also sparked opportunities within the M&A domain. Companies may consider domestic mergers to enhance economies of scale and reduce reliance on international supply chains, thus mitigating tariff exposure. Additionally, firms may target acquisitions in regions unaffected by tariffs to diversify their market presence and reduce geopolitical risks.

Moreover, businesses are looking towards acquisitions that would facilitate supply chain restructuring to localize production and reduce the impact of tariffs effectively. In the first quarter of 2025, 163 deals valued over $100 million were completed globally, a 22% decline from the 210 recorded in the last quarter of 2024. Despite this decrease, there has been a slight upward trend in deal volume over the past two years.

The number of large deals, defined as those over $1 billion, increased year-over-year, with 40 deals completed in Q1 2025 compared to 34 in the same period the previous year. Only one mega-deal, valued above $10 billion, was finalized in the quarter, representing the lowest figure in two years. Industry-specific analysis revealed that materials, telecommunications, and consumer products and services led in performance.

Large and mega deals outperformed the market, showing gains of 6.9 and 8 percentage points, respectively, while mid-sized deals, cross-regional and cross-sector transactions, and quick-close deals underperformed. Mercereau highlighted pent-up demand, capital availability, and companies’ focus on long-term growth strategies as key factors driving M&A activities despite other uncertainties.