European perspective of the M&A outlook for 2025

Corporate partners Marie Bates and Anthony Turner attended the International Bar Association European Corporate and Private M&A Conference in February. This annual event is an opportunity for our team to collaborate and share insights with M&A market leaders around the world, exchanging ideas on best practice.

There was general consensus among European practitioners that 2024 was a challenging year for dealmaking. Many regions have been grappling with long-term rising interest rates and a prolonged period of geopolitical and economic uncertainties. Valuation gaps between buyers and sellers remain a significant hurdle to getting deals done. From a UK perspective, although the change in government has brought a degree of stability from a political perspective, there has been muted confidence in the economic outlook. 

2025 has, however, brought a renewed sense of optimism. Private equity (PE) continues to play a crucial role in shaping the M&A landscape. Dealmakers are keenly aware that PE deal activity has been cautious – with much ‘dry powder’ needing to be deployed and funds coming to the end of their life cycle. There will be plenty of mid-market assets which will be primed for sale, and sellers that can show further potential for growth will be very attractive targets. Assets which will play a part in the ongoing digital transformation will be of particular interest. The UK will look to cross-border activity, with the US dollar remaining robust against the pound. Notwithstanding the likely volatility of the second Trump administration and concerns around tariffs and security, the economic outlook in the US remains strong. US dealmakers anticipated US companies would continue to look overseas – particularly to Europe – for growth opportunities.

Elsewhere in Western Europe, sentiment was not dissimilar to the UK, with geopolitical factors leading to a cautious M&A environment. Some practitioners in Germany experienced a notable uptick in restructuring deals. Further east in Europe, 2024 was also a relatively subdued year for M&A, but technology businesses in particular continue to attract outside investment.  

There was also much discussion around the use of generative AI in the role of legal advisers. Clients are looking to their lawyers to work more efficiently, and many welcome the use of tools which allow this – but most will not tolerate a shift in risk allocation. We see the developments in this area providing opportunity for collaboration between businesses and their advisers as to how to maximise the use of technology for the benefit of both parties.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, February 2025