Explore the dynamics of M&A performance in Q1 2025, uncovering key trends and insights shaping the financial landscape.
The latest Quarterly Deal Performance Monitor (QDPM) by WTW reveals that companies participating in mergers and acquisitions outperformed the broader market by 1.5 percentage points in the first quarter of 2025. This marks the first positive outcome since the end of 2022.
Based on share price performance, the report analyzed M&A deals with values exceeding $100 million, completed between January and March. In collaboration with the M&A Research Centre at Bayes Business School, the findings indicate a recovery following seven quarters of underperformance by acquirers. Historical data demonstrates that post-global financial crisis, M&A transactions have surpassed the market by an average of one percentage point.
Performance across regions varied significantly. North American acquirers underperformed their regional index by 2.2 percentage points in Q1, completing 81 deals, marking the ninth consecutive quarter of negative results for the region.
Conversely, European buyers outperformed their index by a remarkable 16 percentage points, despite a reduction in deal numbers from 42 in the previous quarter to 29. This positive trend was mirrored by UK-based acquirers. In the Asia-Pacific region, dealmakers exceeded their regional index by 5.8 percentage points, with 44 transactions completed, down from 61 in the final quarter of 2024.
Jana Mercereau, head of Europe M&A Consulting at WTW, noted that while the year began on a high note, ongoing geopolitical tensions and new US tariffs could impact M&A activities in the near term.
The introduction of tariffs has increased market volatility and economic uncertainty, prompting companies to adopt a more cautious approach to M&A transactions. A Reuters report highlighted that global M&A volume in Q1 2025 rose by 12.6% to $984.38 billion, driven mainly by the Asia Pacific region, especially China.
However, the US saw a 13% decline in M&A volume, dropping to $436.56 billion. This decline is attributed to uncertain trade policies and potential retaliatory measures, causing companies to hesitate in undertaking major deals.
Despite these challenges, tariffs have also created opportunities within the M&A landscape. According to the Edgar Index, companies may pursue domestic mergers to achieve economies of scale and reduce dependency on international supply chains, thus mitigating tariff exposure.
Businesses might also look to acquire companies in regions unaffected by tariffs, diversifying their market presence and reducing geopolitical risks. There is a trend towards restructuring supply chains to localize production and minimize tariff impacts.
Globally, 163 deals valued over $100 million were completed in the first quarter of 2025, marking a 22% decline from 210 deals in the final quarter of 2024. Despite this quarterly decrease, deal volume has shown a marginal upward trend over the past two years.
The number of large deals, defined as those over $1 billion, increased year-over-year, with 40 completed in Q1 2025 compared to 34 in the same period last year. Only one mega deal, valued above $10 billion, was finalized in the quarter, the lowest in two years.
Industry-specific analysis highlighted exceptional performance in materials (+39.8 percentage points), telecommunications (+29.2 percentage points), and consumer products and services (+13.2 percentage points). Mega deals and large deals also outperformed the market, with gains of 6.9 and 8 percentage points, respectively. In contrast, mid-sized deals, cross-regional and cross-sector transactions, and quick-close deals underperformed the market.
Mercereau concluded that pent-up demand, available capital, and strong balance sheets could drive a rebound in deal activity later in the year.
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