Navigating the future of dealmaking in North America: insights for 2025

The dealmaking landscape is poised for significant transformation in 2025. After a year of cautious waiting in 2024, when uncertainty around geopolitics, interest rates, and inflation kept many companies on the sidelines, market participants are now looking forward with renewed optimism and strategic focus.

The 2024 foundation: setting the stage for growth

The past year saw companies playing a waiting game. Geopolitical tensions, central bank policies, and inflationary pressures created an environment where the anticipated rebound in deal activity fell short of expectations. However, this period of restraint has created pent-up demand and a foundation for more robust activity ahead.

In the wealth management sector, 2024 actually set M&A records despite broader market hesitation. The industry continues to grow with new advisers entering the space, and capital is flowing in meaningfully from private equity, sovereign wealth funds, and venture capital sources. This trend shows no signs of slowing.

For consumer packaged goods companies, the landscape has been shaped by rapidly shifting consumer preferences toward healthier products. This evolution is driving strategic portfolio rebalancing, creating opportunities for acquisitions that help large enterprises enter new channels and adapt to changing market demands.

Interest rates and financing: a shifting paradigm

The financing environment remains a critical factor shaping deal activity. As borrowing rates have declined from their peaks, deal appetite has increased substantially. However, there is a growing realization that rates may not continue their downward trajectory in the short term, creating urgency among potential acquirers to act now rather than wait for more favorable conditions.

The impact of financing varies significantly by buyer type. Large, well-capitalized corporations with strong cash flows often execute deals on a cash basis, insulated from leverage concerns. Meanwhile, companies with heavier debt loads are opportunistically rebalancing their portfolios as rates have improved, looking to deploy new capital at lower leverage rates.

In relationship-driven industries like wealth management, buyers demonstrate creativity in structuring deals around market conditions. Catch-up provisions and earnouts help bridge valuation gaps and manage risk, making financing conditions less of a barrier to getting deals done.

Sector opportunities and strategic priorities

Technology and software

B2B technology continues to represent significant opportunity in the private equity landscape. The sector's importance has grown steadily, and generative AI is expanding what software assets can deliver to customers, making them even more attractive targets.

Healthcare

Healthcare remains a hot sector driven by continuous innovation and strong penetration curves for new products. The combination of demographic trends and technological advancement creates sustained deal flow.

Business services

Information services and business services broadly are seeing increased attention. The potential for AI to make knowledge workers significantly more productive creates opportunities to enhance margins and operational efficiency in ways that were not possible during previous ownership periods.

Consumer products

The consumer products sector faces a unique challenge: consumer preferences are shifting so rapidly that smaller companies and startups are often better positioned to meet emerging needs than large incumbents. This creates M&A opportunities, though the challenge lies in finding targets large enough to meaningfully change portfolio composition.

Portfolio rebalancing toward healthier, better-for-you products represents a major theme. Legislative changes and consumer behavior shifts are driving leading companies to acquire assets that help them adapt to new market realities.

Wealth management

The wealth management industry's fragmentation continues to grow even as consolidation accelerates. Multiple acquisition models exist, driven by qualitative factors around culture and alignment. Success depends less on financial engineering and more on ensuring new partners integrate smoothly and maintain strong client relationships.

The AI revolution in dealmaking

Generative AI has emerged as a transformative force across the deal lifecycle, though adoption remains in early stages with significant room for growth.

Current applications

The most mature AI applications in dealmaking center on knowledge management and document processing. Funds are implementing tools that can:

• Summarize and search deal documents efficiently.
• Analyze confidential information memorandums against fund-specific criteria.
• Generate preliminary management questions based on deal materials.
• Conduct rapid red flag assessments to filter opportunities.

Leading firms are using custom GPT solutions to automate specific workflows, allowing deal teams to process more opportunities in less time. The goal is to expand the top of the funnel, reviewing 50 deals instead of 20 before selecting one to pursue in depth.

Emerging use cases

More advanced applications are developing around several themes:

• Deal sourcing and screening: Automated analysis that checks potential targets against multiple criteria, accelerating initial evaluation.
• Production efficiency: Automated drafting of investment committee memo components, summarization of diligence reports, and streamlined responses to limited partner questionnaires.
• Due diligence acceleration: AI tools help teams navigate large data rooms more efficiently, handling mundane but necessary review tasks and freeing professionals to focus on strategic analysis.
• Relationship enhancement: AI-powered note-taking allows professionals to remain fully engaged in conversations while capturing comprehensive records, and some platforms use AI to identify connection points between individuals.

Evaluating AI in target companies

When assessing acquisition targets, dealmakers are developing frameworks to evaluate AI's impact on business models and competitive positioning. Key considerations include:

• Direct displacement risk: Whether AI can simply replicate what the company does, creating existential risk.
• Competitive dynamics: Whether AI will lower barriers to entry and enable new competitors.
• Market structure changes: How productivity gains from AI might reshape entire industries and pricing models.
• Product enhancement: The potential for AI to make offerings more valuable, enable entry into new markets, or deepen customer integration.
• Operational productivity: Opportunities to improve efficiency in large pools of knowledge workers such as call centers, inside sales, or development teams.

Most companies show both opportunities and threats from AI. The critical factor is whether management teams are paying close attention and actively developing strategies to capitalize on opportunities while mitigating risks.

AI impact on deal activity

Survey data indicates that AI is already influencing deal decisions significantly. Approximately 70% of investors have killed at least one deal due to AI concerns, while 80% have become more excited about opportunities because of AI potential.

As funds gain experience implementing AI in their own operations and portfolio companies, they are becoming more comfortable underwriting AI-related opportunities in new deals. This growing confidence should support more aggressive deal activity around AI-enabled businesses.

Geopolitical and economic factors

Multiple external factors continue to shape the dealmaking environment, though their impact varies by sector and deal type.

Tariff risks as M&A drivers

The potential for new tariffs is creating strategic imperatives for companies with significant cross-border supply chains. Businesses that import substantial product volumes may pursue acquisitions to onshore operations in key markets, turning a potential threat into a driver of deal activity.

Regulatory changes

New legislation around healthcare, product labeling, and ingredient transparency is accelerating the need for portfolio rebalancing. Companies must adapt quickly to changing requirements, and M&A often provides the fastest path to compliance and competitive positioning.

Market volatility management

In relationship-driven businesses, geopolitical and economic uncertainty requires careful management during both deal execution and integration. Buyers must structure transactions to provide sellers with peace of mind, ensuring that client relationships remain stable through ownership transitions.

Deal structures increasingly incorporate mechanisms to address market uncertainty, including earnouts and other provisions that align buyer and seller interests across different economic scenarios.

Public and private market dynamics

IPO activity

The IPO market is expected to see modest improvement in 2025. A backlog of companies has been waiting for the right moment to go public, and current conditions suggest a window of opportunity, though expectations are for measured growth rather than a dramatic surge in new listings.

Private market pressures

Private equity firms face significant pressure to monetize holdings. Plenty of dry powder exists, and many assets have reached the point in their lifecycle where exits make strategic sense. The key question is whether B-quality assets can achieve attractive valuations in the current environment, or if only A-quality assets will command premium pricing.

The ingredients for a robust deal market exist. Funds want to deploy capital, and portfolio companies need to be sold. Success depends on continued improvement in financing conditions and the ability to demonstrate credible value creation plans.

Valuation outlook

Sustaining current valuation levels in private markets will require a shift in value creation strategies. Historically, returns have come from multiple expansion and topline growth, with margin improvement often underwritten but less frequently realized.

Going forward, multiple expansion appears challenging unless interest rates decline meaningfully. This places greater emphasis on operational improvements and cost reduction. AI provides a genuinely new toolkit for finding and capturing margin opportunities that did not exist during previous ownership periods.

For public markets, valuations appear stretched but are supported by strong underlying fundamentals, particularly among mega-cap technology companies with robust returns on equity. The normalizing yield curve provides some support, though predicting near-term direction remains challenging.

Integration: the often-overlooked critical phase

While much attention focuses on getting deals done, integration determines whether transactions ultimately create value.

Cultural alignment

In relationship-driven businesses, cultural fit is non-negotiable. Firms that prioritize qualitative factors and refuse to compromise on alignment see better long-term outcomes. Each successive acquisition provides learning opportunities, and the most successful acquirers remain flexible and adaptable rather than rigidly applying the same playbook.

Client relationship preservation

The actual asset being acquired in many service businesses is the relationship between professionals and clients. Disrupting these relationships destroys value. Successful integration requires ensuring peace of mind for both advisers and their clients, with careful attention to communication and transition management.

Operational complexity

For companies executing multiple acquisitions, integration capacity can become the binding constraint on deal activity. Even when deal flow is robust and financing is available, the ability to successfully absorb and integrate new assets determines sustainable acquisition pace.

Technology infrastructure for dealmaking

Beyond AI, dealmakers are investing in technology platforms that support business development and growth. Predictive analytics help identify potential sellers before they formally enter the market, allowing buyers to build relationships proactively.

Data and analytics capabilities are becoming table stakes for competitive deal sourcing. Firms that can identify patterns in adviser career arcs or company development trajectories gain advantages in anticipating strategic alternatives before opportunities become widely known.

The most sophisticated platforms combine multiple data sources with AI-powered analysis to create comprehensive views of potential targets, competitive landscapes, and market dynamics.

Key risks and challenges

Commodity price volatility

For consumer products companies, input cost volatility presents significant challenges. Cocoa prices, for example, have increased four to six times in recent years, creating urgent needs to rebalance portfolios toward products with different input profiles. M&A provides the fastest and most effective path to reducing exposure.

Talent and relationship retention

In knowledge-intensive and relationship-driven businesses, the risk of key person departure during ownership transitions remains paramount. Deal structures and integration approaches must prioritize retention and engagement.

Target availability

In some sectors, the challenge is not executing deals but finding suitable targets. When consumer preferences shift rapidly, smaller companies and startups often lead innovation, but they may not be large enough to meaningfully impact acquirer portfolios. This creates a mismatch between strategic needs and available opportunities.

Looking ahead

The outlook for 2025 dealmaking is cautiously optimistic across most sectors. After a year of waiting, conditions are improving and pent-up demand is building. Interest rates, while not returning to previous lows, have stabilized at levels that make deals economically viable.

AI is transitioning from a buzzword to a practical tool that is changing how deals are sourced, evaluated, and integrated. Early adopters are seeing productivity gains and developing confidence in underwriting AI-related opportunities.

Geopolitical and economic uncertainties persist, but experienced dealmakers are finding ways to structure around these challenges. In many cases, external pressures are actually creating strategic imperatives that drive M&A activity rather than inhibiting it.

Success in 2025 will require sophisticated approaches to evaluating AI's impact on target business models, creative deal structuring to bridge valuation gaps and manage uncertainty, disciplined integration processes, robust technology infrastructure, and clear-eyed assessment of sector-specific trends. For dealmakers who combine strategic clarity with operational excellence, 2025 presents significant opportunities to create value through thoughtful M&A.