After a slow but hopeful 2024, the mergers and acquisitions (M&A) market is entering 2025 at a crossroads. Despite early optimism, deal flow remains uneven, with some sectors pushing ahead while others are stuck in neutral. What is driving the mixed signals, and will 2025 finally deliver the long-awaited resurgence in M&A activity?

Our latest webinar, moderated by Abby Roberts, Senior Director of Datasite Insights, tackled these questions head-on, with perspectives from top corporate development executives and industry experts.

M&A deal flow: A slow start, but signs of life

Early 2025 is showing signs of increased activity, but some indicators remain fragile. Figures for the number of deals launched through Datasite show that US deal kick-offs were up 5% YoY in January and 6% in February. Diligence times, however, have extended slightly, while the success rate for deal closures has declined.

Nicole Messer, Director of Corporate Development at Veeva Systems, noted that while dealmaking hasn’t accelerated dramatically, it remains steady. “Within the technology and healthcare space, at least, 2025 is off to a solid start. I don't think it's accelerated meaningfully from 2024 yet, but we certainly haven't seen a slowdown. A potentially more favorable regulatory and macro environment could play in our favor.”

Dan Scorpio, Head of M&A and Activism at H/Advisors Abernathy, also noted this uncertainty: “January and February were among the lowest starts to the year in recent history for signed M&A volume. Boards are still being cautious. Many companies are running dual-track or multi-track processes to evaluate their options, which is a difficult thing to assess when none of us knows what the market will look like tomorrow.”

Where are the opportunities?

One area where M&A momentum is unmistakable is technology, especially AI-driven deals.

“Technology M&A is expected to grow approximately 25% year over year, largely due to AI innovation,” said Denise Kim, Senior Director of Corporate Development at Synopsys Inc.

“AI models have become much more complex and require more computational resources... As AI technology advances, the demand for AI infrastructure increases. More companies are investing in semiconductors and cloud infrastructures to meet that demand.”

Still, challenges remain. “Power supply limitations, semiconductor manufacturing constraints and bandwidth bottlenecks are concerns,” Kim added. “That’s also why investment is shifting from AI models themselves to the infrastructure needed to support them.”

Not everyone is jumping into AI headfirst. “I lean toward skepticism when it comes to the AI hype cycle,” said Messer. “At Veeva, we’re taking a thoughtful approach. Rather than rushing to be a first mover, we spent time figuring out what’s actually valuable for our customers. We’ve seen AI being used effectively for automation and workflow improvements, but we’re still far from the large-scale transformation some predicted.”

Buyers on the prowl

While other types of M&A are off to a slow start, capital raises and asset purchases are strong. Datasite’s Forecaster suggests the former is up 21% in the year to date, and the latter, 20%.

Messer believes pent-up demand may drive M&A activity later in the year, though it’s too early to say for sure. “2024 was supposed to be the comeback year for M&A, but that didn't fully come to fruition,” she said. “People have set their eyes on 2025 as the comeback year... Companies have built up their balance sheets and are ready to deploy capital. We’re seeing demand from buyers looking for growth and supply from sponsors looking to monetize long-held assets.”

Closing deals: How to overcome the valuation gap

Still, the market is plagued by the valuation gap between buyers and sellers. “It’s not as severe as it was 18 months ago, but there’s still a mismatch in expectations,” said Scorpio.

Kim emphasized the importance of creative deal structures to bridge the gap: “Instead of paying the full purchase price upfront, buyers can structure deals with earn-outs, equity or deferred payments. We’re seeing more deals tied to milestones such as product development or commercialization, rather than just growth targets.”

Scorpio added that, from the buyer’s perspective, setting the rationale for the deal is crucial. “Clearly articulating the strategic rationale and investment thesis prior to engaging in transaction discussions is important,” he said. “That allows you to periodically review your intentions as the deal progresses and helps protect against working towards the deal at any cost. It's also important to try to understand the seller's rationale – not just value maximization but also succession planning, legacy and branding.”

Will M&A momentum build?

Looking forward, the panelists agreed that dealmaking could accelerate in the second half of 2025 – but uncertainty was the word of the hour.

“Companies can typically manage through one or two areas of volatility," said Scorpio. "But when tariffs, antitrust policies, government spending cuts and immigration policies all shift at the same time, it becomes extremely difficult to close large, complex deals."

While 2025 has yet to bring the flood of deal closures some had hoped for, it’s shaping up to be a year where the right deals – well-structured, strategically sound and resilient – can still thrive.