‘Cautious optimism’ has been the catchphrase for the past year when talking about M&A in EMEA. But is M&A finally poised for a resurgence, buoyed by potential stability, pent-up capital, strategic divestitures, and a growing need for innovative solutions? Vanessa Blackmore, James Liddy, Edward Joudrey, and Merlin Piscitelli recently discussed market dynamics and opportunities with the FT’s Kaye Wiggins, including what it will take for deal success going forward.

Revitalized M&A in 2025?

According to anonymized data from Datasite in September and October, there has been a record influx of new projects on its platform, with a 28% yoy increase in deals set to go live in the next 30-90 days. This points towards a robust start to 2025 for M&A, with multiple drivers in place, from the urgency to deploy capital to strategic divestitures and carve-outs.

And with election uncertainty finally behind us in most regions, companies across sectors should be poised to execute transactions that had been prepared in advance, as many appeared to be waiting for a clearer regulatory and economic outlook. This post-election period is expected to usher in more dynamic deal-making as transaction pipelines shift from preparation to execution.

Is Creativity the Key for M&A?

In EMEA, divestitures, liquidations, and bolt-on acquisitions appear top of the list for dealmaking. As companies adapt to economic pressures and industry shifts, these transactions offer an appealing route for companies to either streamline or strategically expand. Divestitures and carve-outs allow corporations to focus on core assets, while bolt-on acquisitions present PE and corporate buyers with an efficient way to grow via selective, often smaller, deals.

But creativity seems to be key, as stakeholders are increasingly becoming innovative in structuring deals that address liquidity needs without relying heavily on traditional methods of financial engineering. Successful deal-making today requires more than a savvy capital structure—it’s about creating a fundamentally strong, strategically sound asset that appeals to prospective buyers.

Moreover, today’s M&A market has shifted to a buyer’s market, where due diligence is more rigorous and extended than in recent years. This transformation is evident in the data: there’s been a 30% increase yoy in the volume of content on Datasite’s platform and the average time for due diligence has stretched by almost a month. Buyers are now taking longer to assess potential acquisitions, especially as they weigh emerging concerns like ESG factors, supply chain resilience, and cybersecurity.

Therefore, in contrast to the rapid dealmaking of 2021, today’s buyers are focusing on operational improvements and the strategic fit of acquisitions. Deal processes now involve extensive pre-marketing, more personalized engagement with potential bidders, and a greater emphasis on creating long-term strategic value.

Facing market conditions that limit traditional exit routes, PE sponsors are also employing innovative methods to meet investor needs for liquidity. Continuation funds, sales of minority interests, and dividend recaps are becoming more prevalent. Such strategies can allow investors to realize some returns while retaining quality assets with high growth potential. This approach reflects a shift from short-term fixes to strategies that could shape the future of the secondary market, providing more flexibility for both firms and investors.

Is PE Ready to Deploy?

But the question remains, when will PE finally deploy the $1trn in dry powder they are sitting on? Many of these firms are looking for exits on assets held longer than the typical 5-7 years, with approximately 55% of PE-backed assets currently over that threshold. The urgency to exit and return capital is heightened by the need to raise future funds—investors are keenly watching firms’ ability to deploy and realize returns from existing portfolios.

However, high valuations of 2021 mean that some firms must exit at lower-than-expected returns, and many of the traditional alternatives—like dividend recapitalizations—may no longer be available in a market with rising interest rates. This pressure is driving a shift towards secondary market activity and continuation funds, offering a way to provide liquidity without necessarily exiting investments outright.