Bain & Company: Global M&A market expected to heat up by 2025, generative AI reshaping M&A market.

The Bain Company recently released the "Global M&A Market Report for 2025," indicating that after a three-year "cold winter," the global M&A market is expected to warm up in 2025. In recent years, the dual factors of interest rates and regulations that have constrained M&A transactions are expected to ease in 2025. In the face of technological disruption and a post-globalization economic landscape, M&A and asset divestiture will become important strategic tools for companies to respond to profit pool migration. Bain's research on more than 300 M&A practitioners shows that 21% of them have already used generative AI in M&A transactions, up from 16% last year, and one-third of them expect to start using it within the year. In M&A-active companies and private equity firms, the adoption rate of generative AI is even higher. Zheng Siyuan, global partner of Bain and chairman of M&A business in Greater China, stated that M&A activities have cyclical characteristics, and the market will see a recovery this year. Despite a slight warming trend last year, the share of M&A transactions in global GDP is still at a historical low, and the unfavorable market environment over the past three years has restricted the activity of M&A transactions. Even in a sluggish market, leading companies are advancing mergers and acquisitions to navigate market cycles and achieve growth through acquisition. As market conditions improve, more companies will join the wave of M&A. Strong driving force for the rise of the M&A market Bain points out that while the current level of transaction activity is not high, there is a strong internal demand for M&A. Against the backdrop of differentiated economic prospects, supply chain disruptions, and geopolitical tensions, M&A has become a core strategy for companies to balance risks and rewards, and financial investors are eager to try. At the same time, the number of M&A targets continues to increase. Companies adjusting their strategies and private equity and venture capital firms facing liquidity pressures are waiting for the market to recover and valuations to improve before selling assets. In addition, the new governments in Europe and America have a more open attitude towards M&A. In 2025, strategic transaction parties will not be affected by short-term market fluctuations and will be looking for M&A targets that are competitive, profitable, and with sustainable growth. Furthermore, technological disruption is a long-term trend driving strategic transformation and M&A. Companies will develop or acquire generative AI / artificial intelligence, automation, renewable energy, and quantum computing technologies to maintain product and cost competitiveness. There is strong demand for technology M&A transactions from both tech and non-tech companies. Post-globalization and profit pool migration will also drive M&A transactions as companies need to reconfigure their global footprint, seize high-value end markets, ensure supply security, and adjust their strategies based on changes in the profit pool. Generative AI reshaping the M&A market Currently, generative AI is mainly used in transaction search and validation. Bain expects that in the next five years, it will penetrate all aspects of M&A transactions and empower the entire process. Zhou Hao, global partner of Bain and chairman of private equity fund business in Greater China, believes that generative AI will have a profound impact on M&A transaction methods. Early adopters can seize opportunities, while latecomers may lose out in the competition for high-quality targets. There is still time to position oneself strategically. In addition to accelerating target search, screening, and due diligence, early adopters have begun to use generative AI technology for integration planning, divestiture planning, and project management. Bain expects that in the next 12 months, the time it takes for early adopters to draft integration work plans and transition service agreements (TSA) using generative AI tools will be reduced by over 80% compared to before. In the next phase, the tool will be used to access specific company data, determine cost reduction and revenue growth opportunities, and develop value creation plans based on historical acquisition performance. Insights into M&A trends in five major industries The Bain report provides in-depth analysis of strategic M&A trends in 12 industries and 10 regions: Consumer goods industry: In 2024, there were several large M&A transactions, but the total transaction volume decreased by 19%. Many consumer goods companies are evaluating their businesses and divesting low-growth non-core assets. Bain's research found that 60% of consumer goods company executives expect to sell assets in the next three years, with stakeholder support, tax implications, and the presence of buyers as the three key factors in asset divestment decision-making. Energy and natural resources industry: In 2024, there was a wave of consolidation in the oil and gas sector, while chemical companies optimized their business portfolios. The energy sector saw M&A transaction volumes exceed $400 billion, reaching a new high in three years. Companies completing large M&A transactions expanded their cost reduction scale, shortened their cycles, and saw synergies. Financial services industry: In 2024, influenced by technological advancements, regulatory relaxations, and changing customer demands, financial services industry executives returned to the M&A market. The total value of M&A transactions in the financial services market that year increased to $309 billion, with banks and the financial sector accounting for the largest share, and the banking cards and payment sector experiencing the fastest growth. Bain predicts that banks will use M&A to expand their scale advantages, insurance companies will return to their core business, and fraud prevention and identity verification will become hot topics in M&A transactions in the payment sector, thereby continuing the momentum in M&A within the financial services industry. Media and entertainment industry: Faced with tech giants expanding into different sectors, traditional media companies are consolidating their markets, expanding their core businesses, and engaging in cross-industry transactions. In 2024, more than half of M&A transactions in the media and entertainment industry involved cross-industry targets or acquirers. Retail industry: Despite tightening regulatory policies, the volume and value of M&A transactions in the retail industry showed signs of recovery in 2024, with one large transaction capturing market attention. Bain's research found that 75% of practitioners expect the volume and value of transactions in 2025 to be comparable to current levels. Insights into strategic M&A in the Chinese market In 2024, with the introduction of supportive policies by the government, transaction parties increasingly relied on M&A to achieve growth through market cycles, resulting in a 17% increase in domestic M&A transaction volume. In 2024, the government issued the "nine national policies" to improve the quality of listed companies, promote cross-border transactions, and deepen capital market reforms. The financial services industry drove the growth of domestic M&A transactions, accounting for 62% of the growth.