The outlook for 2025 in the transactional market is robust, with expectations of continued growth, despite challenges to dealmaking that remain. These include ongoing geopolitical tensions in the Middle East, Ukraine and elsewhere, the potential for increased inflation, interest rates or reduced growth, a stringent and evolving regulatory and compliance environment, constraints on deal volumes and sizes as more assets enter the market and buyer/investor capacity becomes stretched, uncertainty as regards the US economy and the US's approach to global issues, in particular with a new Trump administration, a trend towards trade protectionism and tariffs, and the potential for valuation gaps persisting in some deals to complicate negotiations.

The following conditions suggest reasonable growth of the transactional market in 2025:

Stable economic conditions

The IMF has forecast growth globally in 2025 of approximately 3.2% and for advanced economies at 1.8% in 2025, up from 1.7% in 2024. India will outpace this by some margin, and the US, the world's largest economy, is currently expected to be resilient and continue to provide most of the thrust for global growth.

• Further predicted interest rate cuts, more readily accessible finance and more attractive valuations.
• Relative capital market stability and rises.
• A strengthening US dollar, making European and Asian assets attractive to US investors.
• Potential reduction of subsidies under the Inflation Reduction Act in the US enabling European and Asian businesses to be able to compete more easily.

Supply and demand

• A number of deals held back in 2024 now need to be done.
• Corporate finance advisers have forecast increased sponsor and corporate buyer activity, more bids per round and higher final offers compared to previous years and growth in process launches.
• PE firms are expected to ramp up sales of ageing portfolio companies and seek new investment opportunities.
• Demand for a market in the large consumer region of Europe, in the fast-growing economy of India or in Singapore (with its China plus 1 position, and stable governance).
• Any new tariffs imposed on China or other countries may mean that there are more cross-border deal opportunities such as with alternative suppliers in other locations to avoid the imposition of tariffs.
• Companies in growing economies such as India increasingly keen to venture abroad to make investments and acquisitions.
• Before the economy fully rebounds, a final pipeline of stressed and distressed assets including in retail, hospitality, car manufacture, construction and real estate coming on to the market, with some bargains to be struck by overseas investors, cash rich strategics and also institutional acquirers with turn around expertise and large groups have a continued need to find efficiencies and reorganise while economic growth is relatively small.
• A significant backlog of private equity exits and corporates that are looking to access the equity markets in 2025.
• A strong US Dollar (unless inflation rebounds in the US, following, among other things, expected broad tax cuts), meaning US buyers and investors may be well positioned to seek European and Asian bargains, though this could be tempered by the America First policy.

Strong growth sectors and the need for transformational change

• With the fast pace of change, and economic and supply chain pressures, the strategic need for acquisitions remains strong, setting the stage for a dynamic and transformative year in 2025.
• In many countries, changing regulations and policies relating to national security, data protection, and ESG require a corporate response.
• A strong interest in high growth sectors, or those with strong governmental support, and transformative technologies, including AI, renewables, financial services (including fintech) energy transition, digital transformation, defence, environmental sustainability, healthcare, though investors will be wary of any new regulatory restraints.
• A focus on Defence and Defence-related sectors such as AI and cybersecurity to face up to hostile threats.
• The need to internationalise a business to face evolving challenges in specific countries.
• Certain markets such as Poland and Italy and certain sectors being ripe for consolidation.

Available funding

• Major tech firms have significant cash reserves for growth and rising stock market valuations will provide strong currency for dealmaking for many large companies.
• Vast supplies of dry powder under pressure to be spent by PE and VC funds alike to comply with fund rules.
• Some governments such as the Netherlands, Poland and the UK establishing investment funds to bolster growth.
• New venture funds being closed (though less than a few years ago).
• At the higher end of the market, an ease in funding is expected to support a move to fewer but larger deals than we have seen recently.

Business friendly regulatory changes

• New Listing Rules by the UK Financial Conduct Authority aiming to reinvigorate the London IPO market, and consideration of refreshing the EU Prospectus Regulations for the same purpose.
• The Singapore Exchange (SGX) positioning itself as a gateway to Asia, aiming to create a deep pool of regional liquidity.
• Business-friendly regulatory changes in India to attract investment including the liberalisation of the foreign investment approval regime, amendments to foreign exchange laws and cross-border merger frameworks, the abolition of the 'angel tax' for investors from FY 2025-26 (though the new anti-trust regime could lead to more regulatory scrutiny of some deals).
• New governments seeking to grow their economies, and in the case of the UK government, perhaps also improving relations with its EU neighbours, providing opportunities for dealmaking.
• Potential for governmental incentives for digitalisation, decarbonisation or regional development making certain assets particularly attractive.

Our lawyers predict that, on the whole and given the above, the deal terms and deal process trends we have seen in 2024 will continue into 2025, though there may be a slight movement towards more comfort around pricing and risk and we may see terms become slightly more balanced rather than buyer/investor friendly.