Industry strength crucial for M&A success in 2025

In the realm of mergers and acquisitions (M&A) in 2025, various sectors stand out as prime contenders for driving activity. Drawing from insights garnered across the MHA network, both domestically and globally, distinct patterns are shaping the landscape ahead.

The technology, media, and telecoms (TMT) sector continue to take the lead. The push towards digitization, the incorporation of artificial intelligence, and the automation of repetitive tasks are not just buzzwords but rather catalysts for authentic structural shifts. Businesses involved in innovation within these domains are highly coveted, leading to stiff competition for top-tier assets. Nevertheless, the scarcity of exceptional businesses in this sector means that valuations for those that do hit the market are likely to be pushed to premium levels.

An essential theme underpinning deal-making momentum is energy transition. This extends beyond renewables to encompass the larger environmental footprint of our lifestyles and workplaces. Industries such as testing, inspection, compliance, and technical engineering are experiencing significant growth. As companies strive to adhere to rigorous environmental standards and enhance the efficiency of the built environment, opportunities for investment and consolidation are on the rise.

The healthcare sector maintains its resilience, despite past political uncertainties, as seen post the recent general elections. The growing and consistent demand for healthcare services positions it as an appealing sector for M&A activity, signaling a steady flow of investment.

Industrials and manufacturing have also witnessed a resurgence. Despite grappling with notable challenges during the pandemic, these sectors are now benefiting from a renewed emphasis on reshoring and bolstering supply chain resilience. Profitable businesses within these sectors are attracting heightened attention, even if they are not commanding premium multiples.

In terms of funding, the landscape remains supportive. Mainstream banks have re-entered the lending sphere for small and medium-sized enterprises (SMEs) with renewed zeal, while alternative lenders continue to be active players. This broad spectrum of funding avenues instills confidence and facilitates the execution of deals.

From a geographical standpoint, markets in India, the Middle East, and select parts of the Far East, notably Singapore and Malaysia, are emerging as significant players. Notably, Middle Eastern investments are robust, especially in property-backed domains, and Ireland remains a preferred gateway into the broader European market post-Brexit.

Despite geopolitical uncertainties, emanating largely from the US, the global desire for cross-border M&A endures. This inclination is driven by the quest of international businesses for expansion, entry into new markets, and tapping into fresh talent pools.

While valuations continue to be rooted in EBITDA multiples, there is a growing emphasis on cash generation and free cashflow conversion. Buyers are adopting a more vigilant approach to due diligence, but businesses showcasing solid cash generation capabilities are able to negotiate favorable terms.

In essence, 2025 is poised to be a year where sectoral strength and the quality of earnings will serve as pivotal factors for M&A success. Companies positioned strongly in high-demand sectors and capable of showcasing robust fundamentals are set to enjoy a competitive advantage. In an environment rife with liquidity and eager buyers, avenues for growth, investment, and transformation are abundant.

Andrew Feeke elaborates on these dynamics and more in The MHA Podcast – Trusted Insights, Strategic Advantage, offering listeners valuable insights into the evolving M&A landscape.