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2025 began with a strong degree of optimism for a rebound in M&A, driven from the US, with the anticipation of a pro-business, anti-regulation approach of President Trump. The reality was different and M&A appetite was, with some exceptions, particularly hard hit by the introduction of tariffs and unpredictability of policy direction.
The year turned, however, with a Q3 surge – one of the strongest quarters since 2021 – which continued apace into Q4. According to Herbert Smith Freehills Kramer's latest Global M&A Outlook report, sufficient equilibrium was reached for parties to pick up dealmaking plans, once there was some degree of clarification on policy and direction of travel.
Corporates were at the forefront of this resurgence, executing transformative transactions driven by long-term ambitions and determination to close deals that had been under consideration for some time. Private equity was by no means absent, though, and achieved some significant deployments of capital, although in many cases had competing priorities.
Megadeals also drove the market in 2025 lifting deal values to US$4.3 trillion by the end of the year, up nearly 40% on 2024, despite overall volumes were down around 2%.
Two themes defined 2025 and frame the outlook for the year ahead: the heavy lifting required to get deals done, with resilience and creativity needed to get deals across the line; and the ongoing regulatory risk, with more regulators, more regulation and negative risks globally.
Herbert Smith Freehills Kramer's Global M&A Outlook 2026 report titled "Hanging out, 'situationships' and going official – it's complicated" explores the complexity of the M&A landscape in 2025 and the anticipation of a busy market in 2026.
Gavin Davies, Head of M&A at Herbert Smith Freehills Kramer, says: We faced a complicated picture in the M&A market in 2025. Many buyers and sellers remained in exploratory phases with no serious near-term prospects of completing a deal, while others were locked in "situationships" with protracted negotiations. Yet in the final tally we saw a significant number go official and commit to transformative deals."
"We were reminded that M&A is about resilience, adaptability and creativity. Despite early uncertainty, the market rebounded strongly in the second half of 2025 driven by strategic ambition and megadeals."
In the report, lawyers from across Herbert Smith Freehills Kramer's global offices examine key legal challenges and opportunities in the current M&A environment:
- How tariffs and geopolitics are reshaping M&A
- Minimising disputes risk in transactions
- AI's growing influence on transactions
- How dealmakers are using different skillsets to get deals signed
- The influence of activists driving transaction strategies
In 2025, tariffs and geopolitics moved from background factors to the centre of global M&A. Trade renegotiations, national security priorities, and expanding foreign direct investment (FDI) regimes reshaped deal terms and execution risk. Rebecca Maslen-Stannage, M&A partner and Chair of Herbert Smith Freehills Kramer, notes that: "Successful execution now requires the ability to anticipate political shifts, navigate complex multi-jurisdictional regulatory pathways and incorporate tariff and supply-chain resilience directly into deal terms."
Activism remained a powerful force in global M&A in 2025. Caroline Rae, M&A partner at Herbert Smith Freehills Kramer, comments: "Activists continue to have a significant influence on M&A – driving change, shaping strategy, and willing to block a deal where they think the price or strategy isn't right."
In 2025, getting deals signed required more than negotiation. Ernest Wechsler, Managing Partner, Corporate, US, Herbert Smith Freehills Kramer, says: "Valuation gaps, heightened regulatory scrutiny, and rigorous diligence added new layers of complexity. We saw many dealmakers draw on relationship-led strategies and innovative structures to overcome uncertainty and drive forward deals."
The report also examines how AI has become embedded across the M&A lifecycle. Malika Chandrasegaran, Head of M&A, Asia, Herbert Smith Freehills Kramer, comments: "2025 marked the year that AI become a deal-shaping force, influencing both acquisition decisions and deal execution. When using AI on a transaction, the winners in 2026 will be those who harness AI to accelerate diligence and decision‑making while carrying out careful oversight to ensure accuracy and manage limitations."
Looking ahead to 2026, Gavin Davies concludes: "We don't expect an immediate return to the fast-paced, competitive PE-led auctions of previous years. However, we anticipate that 2026 will be an active and dynamic year for dealmaking."
"Hanging out, 'situationships' and going official – it's complicated" is available here.
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