5. Private Equity's Growing Influence

Private equity (PE) firms have become major players in M&A activity. Their influence has grown significantly in recent years, shaping deal-making across industries.

PE firms are now involved in a large portion of M&A transactions. In 2023, PE-backed deals accounted for over 30% of global M&A volume. Let’s explore a few specific trends in private equity.

Decreased Fundraising

According to McKinsey’s Global Private Markets Review 2024, there was a slowdown in private markets in 2023, influenced by macroeconomic challenges such as high financing costs and uncertain growth. Fundraising fell by 22% globally, with North America seeing declines and Asia experiencing sharp drops. 

However, private equity (PE) buyouts saw strong fundraising. Fundraising is highly concentrated, with larger funds performing better. 

Despite tough conditions, private debt and real estate markets showed resilience while venture capital struggled. With higher financing costs and shrinking multiples, private equity managers must focus more on revenue growth and margin expansion.

Sector Diversification

PE activity has expanded beyond traditional sectors. Firms now invest in technology, healthcare, and renewable energy. This diversification has broadened PE's impact on M&A markets.

Private equity investments have surged in the professional services sector, notably in UK regional law firms. Firms are consolidating smaller practices into larger entities, leveraging automation and technology to enhance efficiency and scalability. In 2024, private equity investments in UK law firms and related businesses reached an estimated £534 million (US$650.7 million).

Healthcare M&As have rebounded, with dealmakers anticipating a resurgence of transactions exceeding US$10 billion during President Donald Trump's second term. Reduced antitrust scrutiny is expected to encourage previously shelved deals. Key sectors poised for deals include oncology, rare diseases, and new weight-loss drugs.

Private equity firms are also increasingly investing in technology and data centers, sectors that offer stable revenues and growth potential. For instance, Blackstone's acquisition of Infocom and Fengate Asset Management's control of eStruxture Data Centers highlight this trend.

Value Creation Strategies

PE firms focus on operational improvements and growth strategies. They often bring in specialized management teams to boost performance. This approach has led to higher returns and increased interest from investors.

Cross-Border Transactions

Private equity firms significantly boosted their investments in Europe, capitalizing on the region's economic challenges to acquire large companies at reduced valuations. European buyout deals exceeding US$1 billion surged by 78%, totaling US$133 billion, compared to a 29% increase to US$242 billion globally. 

Notable transactions included a US$6.9 billion deal for Hargreaves Lansdown and a US$5.5 billion acquisition of Darktrace by Thoma Bravo. This trend reflects US private equity funds targeting stable European economies such as the UK, the Nordics, and Germany.

6. Emphasis on Data Privacy During Acquisitions

Data privacy has become a crucial factor in M&A. Companies now pay close attention to data protection practices when considering potential deals. Let’s look at a few specific trends related to data privacy during acquisitions. 

Increased scrutiny of data practices

Acquirers are examining data security measures more closely. They want to avoid inheriting data breaches or privacy violations. This scrutiny helps prevent costly legal and reputational issues after the merger.

Due diligence for data protection

M&A teams now include data privacy experts in due diligence processes. These specialists assess the target company's compliance with data protection laws. They also evaluate potential risks related to data handling.

Integration of privacy policies

After acquisition, companies focus on aligning data privacy practices. This includes merging data protection policies and procedures. The goal is to ensure consistent data handling across the newly combined organization.

Cross-border data considerations

Global M&A deals face complex data protection challenges. Different countries have varying privacy laws. Companies must navigate these regulations to avoid compliance issues when merging international operations.

Technology-driven privacy assessments

Advanced tools, such as DealRoom’s M&A Platform, now help analyze data privacy risks in M&A deals. These technologies can quickly scan large volumes of data and identify potential privacy concerns before finalizing acquisitions.

7. Shift Towards Vertical Integration

Vertical integration has become a growing trend in M&A activity. Companies are increasingly looking to control more aspects of their supply chain and value-creation process.

This shift allows businesses to reduce costs and improve efficiency. By owning multiple stages of production, companies can streamline operations and eliminate middlemen. Vertical mergers often involve taking over a supplier or customer, which helps companies secure important resources or distribution channels.

The healthcare industry has seen a surge in vertical integration. Companies are investing in value-based care infrastructure, care coordination platforms, and integrated delivery systems. Many providers are merging with insurers or pharmacy benefit managers to create integrated systems. Amazon's US$3.9 billion acquisition of One Medical and CVS Health's purchase of Signify Health for US$8 billion exemplify this trend.

In the tech sector, vertical integration is also on the rise. Large tech companies are acquiring hardware manufacturers, software developers, and content creators to build comprehensive ecosystems.

For example, several tech giants ventured into semiconductor manufacturing to secure supply chains and reduce dependence on external suppliers. This move not only ensured a steady supply of critical components but also provided greater control over production processes. Companies like Apple and Google have developed custom silicon chips to meet specific technical demands.

Vertical integration can offer advantages in uncertain markets. It allows firms to better manage supply chain risks and respond quickly to changing demand.

However, this strategy also comes with challenges. Integrating different business units can be complex and may require significant investment.

8. Increased Scrutiny on Antitrust Issues

Antitrust regulators are taking a closer look at mergers and acquisitions — a trend that’s reshaping the M&A landscape.

Recent years have seen increased scrutiny of cross-border deals. Regulators are paying more attention to how these deals might affect competition. 

Labor issues are now under the microscope, too. Authorities are examining how mergers could impact workers and job markets. Vertical deals face tougher reviews.

Companies involved in mergers are responding to this trend. Many are increasing their lobbying and political contributions during antitrust reviews. The tech sector, in particular, is feeling the heat. Big tech firms face extra scrutiny when they try to acquire smaller companies.

Regulators are looking beyond just price effects. They now consider factors like data privacy and innovation when evaluating deals. This increased scrutiny means some deals are taking longer to complete, so companies must plan for longer review periods.

Antitrust concerns have led to more deal breakups. Some high-profile mergers have been blocked or abandoned due to regulatory pushback. This trend isn’t limited to the US — antitrust authorities worldwide are cooperating more closely on cross-border deals.

9. Use of Earnouts in Deal Structuring

Earnouts have become a popular tool in M&A deals. They help bridge valuation gaps between buyers and sellers. In 2023, approximately one-third of private-target M&A deals included earnout provisions, marking a significant increase from 21% in 2022 and 18% in 2021.

Earnouts tie a portion of the purchase price to future performance. This reduces risk for buyers and allows sellers to potentially earn more. A typical earnout lasts 1-3 years and is based on revenue or profit targets.

Earnouts have traditionally been common in the life sciences sector but are now gaining traction in the broader technology industry, where companies often have volatile growth rates and intangible assets like intellectual property and customer data. The inclusion of earnouts in non-life sciences M&A deals grew to nearly one-third in 2023, up from 21% the previous year.

In the tech sector, earnouts are especially relevant for middle-market companies, which may be in earlier business stages and have less predictable financials. Earnouts often focus on metrics like revenue or EBITDA, with subscription-based companies using annual recurring revenue thresholds. Despite their benefits, earnouts can lead to disputes due to ambiguous terms, so robust due diligence and clear structuring are crucial for maximizing deal value.

Earnout structures are getting more complex. Some now include multiple milestones or tiered payouts. Others use non-financial metrics like product launches or customer retention.

Buyers favor earnouts in uncertain markets. They provide downside protection if projections aren't met. Sellers see them as a way to maximize value in high-growth businesses.

Legal experts warn about potential disputes. Clear, measurable targets are crucial. So is agreeing on how to calculate results. Some deals now include third-party auditors to verify earnout achievements.

Earnouts often range between 10% and 25% of the purchase price, but this varies widely by industry and company size. Earnouts are commonly calculated based on metrics like revenue or EBITDA. Other factors, like the complexity and risk involved in the deal, as well as the uncertainty around post-closing performance, can play a role. 

especially in industries like technology where companies may have volatile growth or less tangible assets. Some tech startups see earnouts of up to 50% of the purchase price.

10. Virtual Deal Making Becoming Standard

Virtual deal making is changing how M&A deals happen. Companies now use online tools to complete deals without meeting in person.

Virtual data rooms (VDR) are a key part of this trend. These secure online spaces let companies share important files during deals. Virtual data rooms are becoming the standard tool for due diligence in M&A transactions.

Video calls are replacing face-to-face meetings. Deal teams use platforms like Zoom or Microsoft Teams to negotiate and close deals, saving time and money on travel. Additionally, digital signatures are speeding up the process.

Virtual deal making is one factor driving growth in cross-border M&A., allowing companies to easily work with partners globally. AI and data analytics are improving deal analysis. These tools help companies spot trends and make better decisions faster. 

Virtual deal making proved vital during recent economic challenges. It allowed M&A activity to continue even when in-person meetings weren't possible.

Frequently Asked Questions

What factors are driving current global M&A activity?

Key factors include the pursuit of strategic growth, cost synergies, access to new markets, technological advancements, and regulatory changes. Companies are also focusing on diversification, overcoming market disruptions, and achieving economies of scale.

How has the M&A landscape changed in 2025 compared to previous years?

Compared to previous years, 2025 is witnessing a more optimistic M&A environment. The M&A landscape in 2025 is characterized by increased activity, substantial private equity involvement, sector-specific growth, and a more accommodating regulatory environment. This contrasts with previous years when constraints such as higher borrowing costs and stringent regulatory scrutiny posed significant challenges to M&A activities. 

Which industries are experiencing the most significant M&A activity this year, and why?

Technology, healthcare, and financial services are leading the charge in M&A activity. The technology sector is driven by the need for innovation and scale, while healthcare is consolidating to address regulatory challenges and rising costs. Financial services are seeing consolidation to enhance digital capabilities and increase market share in a rapidly changing environment.

What trends are emerging in the valuation of companies in M&A transactions?

Valuations are increasingly focused on intangible assets such as intellectual property, data, and customer relationships. There is also a greater emphasis on due diligence related to environmental, social, and governance (ESG) factors, as these considerations impact long-term growth potential and risk assessment.

What role is technology playing in shaping M&A deals and due diligence processes?

Technology is revolutionizing the due diligence process by enabling more efficient data analysis, risk assessment, and integration planning. Artificial intelligence, machine learning, and blockchain are being utilized to streamline identifying key assets, improve transparency, and enhance decision-making during M&A transactions.

Final Thoughts

As we enter 2025, the landscape of M&A is undergoing significant transformations. Companies are embracing advanced technologies like artificial intelligence, prioritizing Environmental, Social, and Governance (ESG) considerations, and shifting toward vertical integration to gain control over supply chains and operational efficiency.

Cross-border transactions are on the rise, and private equity firms are becoming more influential in shaping deal activity. Data privacy, antitrust scrutiny, and the use of earnouts will continue to play pivotal roles in deal structuring, while virtual deal-making has become an essential tool for global M&A processes.

To navigate these trends, companies need robust M&A processes and tools. DealRoom is the leading M&A Software Platform that can help streamline workflows and improve outcomes.

By unifying processes, tools, and data, the platform creates a single source of truth that improves visibility, enhances AI utilization, and promotes cooperation among all stakeholders. Request a demo today to see how DealRoom can support your M&A strategy.