According to DLA Piper’s recently released 2025 Global M&A Intelligence Report, last year saw a “modest recovery” in the sector, marked by an 8 per cent increase in activity compared to 2023.

The report also projected that the sector is “still poised for growth” in this coming financial year, building on the recovery seen last year.

According to Ashurst’s M&A Deal Report 2025, this revival could be driven by a combination of favourable economic conditions, including “falling interest rates, a low Australian dollar and pent-up investment capacity”.

However, despite several reasons for optimism regarding the M&A outlook in FY25–26, four M&A lawyers have expressed caution, emphasising that practitioners in this field still face obstacles to navigate.

Trump’s return fails to ignite M&A surge

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Instead of sparking a surge of corporate activity as many had expected, Karen Evans-Cullen, a partner at Gilbert + Tobin, pointed out that Donald Trump’s return to the US presidency has brought increased unpredictability and uncertainty to the M&A market.

“The predicted boom in M&A following Trump’s return to power has not eventuated; in fact, the current volatility and uncertainty created by Trump’s first 100 days is having a dampening effect on M&A as participants pause their M&A plans and adopt a ‘wait and see’ approach,” she said.

Amid this unpredictable climate, she expects dealmakers to concentrate on areas “where the tariff wars will have little impact, and with fears of recession in the US, on traditionally defensive sectors such as healthcare, infrastructure, and non-discretionary retail”.

Evans-Cullen indicated that, despite the current period of reduced activity, she is confident that this slowdown is temporary and will not result in a prolonged downturn.

“We don’t expect this temporary softening in the M&A market will be long-term – there is still significant liquidity in the market, with private capital having significant amounts of capital to deploy. [Corporations] will be looking to M&A for growth or to realign their portfolios so they are optimised to meet the changed market conditions,” she said.

“We are also expecting an increase in M&A before the end of 2025 to beat the start date of the new merger regime, particularly for deals which do not raise any competition issues and would otherwise not have required an approach to the ACCC.”

In this uncertain market, Evans-Cullen emphasised that the main challenge for lawyers to overcome is to stay focused on critical issues rather than becoming sidetracked by less significant developments occurring within the market.

“The challenge for lawyers in this environment is to remain flexible and adaptable, to focus more on the things that matter, rather than getting distracted by the things that don’t matter, and not assume that the deals proceed in accordance with the usual playbook,” she said.

Valuation challenges

According to Michael Ziegelaar, partner and head of Melbourne corporate group at Herbert Smith Freehills, the biggest challenge for M&A lawyers entering FY25–26 is the economic landscape and its effects on valuations.

“Recent global political and economic uncertainty, and the resulting valuation impacts, is likely to be the main challenge for M&A in FY26. Unpredictable US policy is challenging the ability of businesses to price M&A deals and the ability of investors across the globe to model their potential returns. The decrease in M&A in Q1 CY25 bears this out,” he said.

However, Ziegelaar expressed a cautiously optimistic outlook for this sector, noting that strong demand for deals remains – and the rebound in deal activity across the Asia-Pacific region indicates a growing sense of investor confidence.

“Recent stock market movements show that investor confidence can change quite quickly. Deal announcements in the Asia-Pacific region consistently increased in each quarter of CY24 to a four-year high and only dropped in Q1 CY25 – so the foundation for increased M&A is there,” he said.

“Private equity, private capital and super funds are likely to drive M&A activity. Also, the list of businesses needing or wanting to do deals is likely to be increasing due to pent-up demand, especially where there is a strong commercial imperative to do a deal. An example of this is the need for private equity to exit some long-held assets. It may be that such transactions occur once businesses become familiar with the ‘new normal’.

“Predicted interest rate decreases will also help. A low Australian dollar will encourage international investment into Australia. Australia’s incoming merger reforms, which commence on 1 January 2026, may also incentivise M&A during the rest of CY25 before the mandatory notification period starts. It may also encourage dual tracks as sellers contemplate IPOs to deal with any concerns posed by the merger reforms.”

While he recognised that there may be “fewer M&A deals” soon, Ziegelaar told lawyers to “stay close to their clients and keep their ear to the ground for emerging M&A opportunities”.

Geopolitical pressures persist

Eric Thianpiriya, partner at Baker & McKenzie, remarked that the M&A market has faced challenging conditions this financial year, highlighting that geopolitical instability, international conflicts, and slow economic growth are the main factors contributing to this condition.

“As we head into FY26, we expect relatively challenging M&A conditions. Globally, geopolitical uncertainty, from US/China relations to ongoing conflicts to de-globalisation, continues to dominate,” he said.

“In Australia, sluggish economic growth, persistent inflation, and high interest rates are dampening M&A activity. The new merger control regime will also present its own set of challenges.”

Despite the persistence of specific market concerns, Thianpiriya asserted that several promising “green shoots” are emerging in the M&A landscape, worth paying attention to.

“Having said that, there are green shoots – M&A activity levels remained relatively resilient in FY25, certain financial sponsors are sitting on significant dry powder, the federal election should present some certainty moving forward, there appears to be some de-escalation of the US/China trade tensions, M&A activity in certain sectors remains strong – e.g. renewables, digital infrastructure, healthcare, technology etc., and there is an expectation that the RBA’s stance will turn more dovish,” he said.

Australia home to stable M&A activity

The DLA Piper report also indicated that Australia’s M&A market saw “strong growth” last year, driven by “renewed policy certainty following the federal election and continued interest from international investors”.

In light of this growth, Jyoti Singh, head of corporate at DLA Piper Australia, said that in FY25–26, Australia will continue to be a stable and appealing investment destination, which she expects to drive a 10 per cent increase in M&A activity this year.

“Australia continues to stand out as a stable and attractive market in a world of uncertainty, particularly with renewed policy clarity post-federal election. With strong interest in sectors like energy transition and technology, we’re optimistic that M&A activity could rise by up to 10 per cent in 2025,” she said.

Jonathan Farrer, a partner at Corrs Chambers Westgarth, echoed these sentiments, pointing out that Australia’s M&A market has begun the year on a relatively positive note, remaining an appealing destination for foreign investors.

“While uncertainty relating to escalating trade tensions has been a headwind for global M&A deals, Australia’s M&A market had a reasonable start to 2025. US acquirers continued to be the largest pool of buyers in the Australian M&A market by both deal volume and deal value for Q1 2025, by contrast to US-Canada cross-border deals which have fallen to recent lows,” he said.

“We’ve seen particularly strong activity levels in the gold sector and a steady flow of mid-market software and digital infrastructure deals.”

Due to this, Farrer expressed that Australia will remain an attractive destination for global capital, asserting that the introduction of tariffs is likely to position the nation as a more favourable market for foreign buyers.

“Looking forward, Australia remains well placed as a destination for global capital. Tariffs will lead foreign buyers to start considering other markets for expansion, and both US and other global companies are likely to view Australia favourably relative to other markets,” he said.

“Other potential tailwinds for the Australian M&A market include stock market volatility starting to return to more normal levels after peaking in the immediate aftermath of the tariff announcements, the prospect of lower interest rates in coming months and more domestic political certainty following the federal election.”