Mergers and Acquisitions Expected to Increase in the Coming Year

Mergers and acquisitions (M&A) are expected to see a rise in the upcoming year, according to Fitch Ratings. With favorable financials and easing regulations, the stage is set for an increase in dealmaking activity in 2025.

Factors such as high equity valuations, tight corporate bond spreads, and lower interest rates create an environment supportive of M&A. Many U.S. companies have the financial capacity for acquisitions, with 82.5% of North American firms having room within their credit ratings to take on additional leverage, according to Fitch.

Diversified industrials and building products sectors are expected to continue growing through M&A, aligning business portfolios with attractive markets and focusing on competitive strengths. In the oil and gas sector, robust M&A activity is anticipated as producers seek to expand and replenish inventories.

The regulatory landscape may also play a role in shaping M&A deals, with expectations that some sectors, such as healthcare, could see increased activity under a new administration. However, Fitch cautions that the impact of heightened M&A activity on credit ratings could be mixed, as increased leverage from deals can sometimes outweigh the benefits to businesses, potentially leading to credit rating downgrades that are challenging to reverse.

As we look ahead to the new year, the outlook for M&A activity appears positive, driven by a combination of financial strength, regulatory changes, and market dynamics that could contribute to increased dealmaking in various sectors.