Despite uncertainty on many fronts, the global M&A engine appears to be shifting back into a higher gear. M&A activity, as measured by deal value, has increased significantly in the second half of 2025, with deal makers turning their focus to larger transactions in resilient sectors, leveraging creative capital and exist structures.

In a recent conversation on the Global Corporate/M&A Podcast, Jon Dhanawade, a Private Equity partner at Mayer Brown, and Steve Rathbone, Managing Director and Vice Chairman at Stout, unpacked the forces behind the surge.

“Dealmaking is increasing, and it’s scaling up as we head into the end of 2025 and into 2026,” noted Steve. September marked a pivotal month. “Overall M&A deal value jumped more than 100% compared to a year earlier, and deal volume climbed by over 40%.” He notes that deal size has been a factor: “Mega deals — transactions over five billion dollars — have surged and are acting as a catalyst for the overall market.”

Much of this activity is occurring in the United States, which accounted for roughly 72% of global deal value. Technology and AI infrastructure, electrification and power, telecom, and healthcare are leading arenas. Jon emphasized that a supportive macro backdrop is another factor boosting M&A markets amid mixed signals. “Real GDP growth has proved resilient, and the Fed is signaling further rate cuts, which lowers the opportunity cost of acting now, rather than waiting.”

Key Drivers

For Steve and Jon, the following are key drivers behind the M&A deal flow:

• Cross-border M&A is ticking up despite complexity. “Inbound and outbound US acquisitions each rose by about 9% in the first half of 2025 compared to the first half of 2024,” said Steve. Globally, deal values climbed from roughly $1.3 trillion to $1.5 trillion year-over-year in H1, about a 15% increase. Yet domestic U.S. activity is setting the tone, with buyers increasing investments and capital largely staying onshore. Asia-Pacific investors are recalibrating as well. “They’re investing in the Americas — about 22% of their total deal value in H1 2025, up from 11% the previous year,” Steve observed. EMEA buyers shifted toward the Americas and Asia-Pacific to find growth or ease of execution.
  
  Jon points out that capital seems to be gravitating to the assets and geographies that are seen as most strategically critical and execution-friendly. Still, he flagged policy friction: “Tariffs and shifting US international policies have tempered some of that enthusiasm. Dealmakers are increasingly favoring local or regional plays where the execution risk feels more controllable.”

• Industrial and infrastructure dealmaking has accelerated materially. “Global industrials M&A has picked up sharply,” Steve said. “In the second quarter of 2025, transaction value hit about $135.4 billion, up from roughly $77.1 billion in the same quarter of 2024.” Infrastructure’s appeal as an asset class stems from its long-duration, predictable cashflows. “They generally have the potential for providing long-term revenue streams and steady yields,” Steve explained. Investors are targeting water management, pre-cast concrete, nuclear technology, and other assets aligned with energy transition and modernization.
  
  
• Parties are finding ways to bridge valuations gaps. Steve pointed to postponed IPOs and public market sentiment that often feels unmoored from fundamentals. “Given the fluctuating interest rate, inflation, geopolitical landscape, supply chain, and regulatory developments, the fact that valuation gaps remain is not surprising. I see this as a continuing part of the environment and M&A professionals will need to remain on their game to manage these challenges.”
  
  Jon agreed that this friction complicates exits and slows processes. Yet he sees reasons for optimism. “Dry powder is substantial, and several global managers have announced ambitions to deploy substantial capital abroad. Financing innovation is evolving. We’re seeing a lot of creativity at all levels of the capital stack being utilized by both buyers and sellers to get deals done.”
  
  Steve is cautiously hopeful: “The hope is that some added macro stability combined with creative capital structures will ease the logjam at least partially. But in the near term, the market is still working through the math, and there is no immediate resolution in sight.”

• Dealmakers are factoring policy volatility into their deals. “Tariffs and policy-related considerations are front and center and their impact has rippled into supply chains, deal timelines, and capital markets,” Jon noted.
  
  Steve added rate and inflation uncertainty to the list. “Add in the risk of rates remaining ‘higher for longer,’ persistent inflationary impulses connected to tariffs and policy, and broader geopolitical uncertainty . . . this all affects capital’s comfort level with certain types of investments.”
  
  For cross-border deals, Jon highlighted timing risks. “Currency volatility and geopolitical tensions across several regions inject timing risk as well. They’re frictions that push buyers to seek out cleaner deals with greater closing certainty.”

• Despite friction, activity lanes remain open. “Intra-regional transactions continue to move,” Steve said. “Ongoing trade agreements, nearshoring dynamics, and valuation differentials across geographies are creating actionable pockets of value.” Jon sees portfolio reshaping as durable. “Divestitures, synergistic add-ons, and carve-outs remain on the agenda, in addition to supply chain optimization.” Steve also flagged activism and tax policy as powerful forces. “Activism remains a catalyst—focused on valuation, structure, and capital allocation. And then there’s the tax dimension. New legislation in the United States is shifting how deals are structured, priced, and taxed.”
  
  Jon summarized the investor preference succinctly: “Investors are rewarding steady growth, predictability, and scale . . . larger, bolder strategic combinations in favored sectors and geographies.”

• The private equity sponsors are recalibrating and re-accelerating. “On one hand, buyout activity earlier in the year lagged. On the other hand, from late summer onward, private equity engagement has accelerated,” Steve explained.
  
  Jon sees exit dynamics as a key constraint. “Persistent uncertainty has limited overall exit activity, pushing private equity firms and their investors to explore alternative liquidity strategies such as recapitalizations and continuation funds.”
  
  Sponsors are leaning into add-ons and scale. “Add-ons are dominating buyouts, roughly three-quarters so far this year, as sponsors lean into scale and synergies to deploy capital,” Steve said.
  
  Jon noted that carve-outs are becoming more targeted with sponsors “pursuing fewer but higher-upside carve-outs where their integration expertise and operational playbooks can unlock meaningful returns.” Exits overall remain well below pre-pandemic averages, and hold times remain extended.

• Dealmakers are turning to creative capital and exit structures. “We’re seeing seller rollovers, earnouts, and structured equity — tools to bridge valuation gaps,” Steve said. “Continuation funds and minority recaps are providing liquidity without full exits. Co-control deals are letting sponsors share risk and governance while keeping growth optionality and future upside exposure.”
  
  Jon reports that he is “seeing a lot of structured equity at the moment, including preferred equity . . . sponsors who historically focused almost exclusively on control deals are now more willing . . . to pair up with other sponsors on club deals or willing to take minority positions.”
  
  The bid for assets with durable cashflows is fierce, especially for funds with lower costs of capital. “Funds like ‘core plus’ infrastructure and ESG-focused funds are poised to be active,” Steve said. “Power, energy, tech, and business services remain priority hunting grounds.”

The Year-End Playbook and Watchlist

In this environment, Steve and Jon suggest a pragmatic playbook for sponsors:

• Exit where you can. Prioritize trophy assets that have clear buyer interest.
• Keep assessing the impact of tariffs and other international policies across portfolios, as they all factor into the perceived value of an asset.
• Stay flexible on deal pathways. Analyze in depth what the exit or partial exit options may look like.

Assume volatility. Lock in financing early where possible and avoid processes where regulatory risk can swamp the timetable. Keep in mind that domestic and intra-regional plays may get cleared faster and cheaper than complex cross-border bids.

Looking ahead to Q4 and into 2026, dealmakers should keep an eye on:

• The interest rate path and credit market openness (Steve notes that access to capital is “the oxygen for mega deals, which also materially impacts middle-market dealmaking and confidence to bid, win, and deploy capital.”)
• Trade and tariff clarity and geopolitical risks.
• The IPO market, especially in the United States (Steve emphasizes that these markets “act as a pressure valve for larger exits.”

Steve concludes that “If you’re a dealmaker recalibrating your playbook, the watchwords are scale, certainty, creativity and operations.”

Learn more about Jonathan A. Dhanawade here.