Creating value while responding to the new risks
According to the Financial Times the first quarter of 2025 saw the value of global M&A reaching $758.4bn, a 17 percent increase from the first quarter of 2024. However, that increase has been propelled by a few megadeals, while the number of deals is down 18 percent over the same time, the lowest number of transactions since 2015. [i]
Although deal volume is down, transactions are still being pursued, albeit with more caution. The findings of the 2025 edition of the Annual M&A Success Survey, conducted by Saïd Business School, Global PMI Partners, Sterling Technology and E78 Partners, provides insights into the key elements that are essential for acquirers to achieve their deal rationales, along with guidance on how to respond to new M&A challenges.
A case in point: AstraZeneca’s recent $1bn bid for EsoBiotec is indicative of how big pharma is using M&A to address the 'patent cliff' the sector is facing. Over the next several years drugs currently accounting for more than $200bn of revenue will face competition from generics, including blockbusters such as Merck’s Keytruda, which improves the immune system’s ability to fight cancer. [ii]
Dealmakers in pharma, media and other industries such as technology and energy who also have deals in the 2025 pipeline would do well to apply the key lessons from the 2025 M&A Success Survey to their impending transactions.
Key findings from the 2025 survey include:
- The top deal rationales were gaining market share, improving economies of scale, and adding products and services.
- Selling a non-core business remains the most common driver of carve-outs.
- 60% of transactions were cross-border with 40% being one country only transactions.
- Finance, people/HR and legal were the top three due diligence focus areas. While these traditional diligence areas remain dominant, companies are increasingly broadening their due diligence scope to include more detailed integration planning, cultural alignment and technology fit.
- Only 40% of respondents use an M&A playbook.
- Integration complexity was reported to be driven by multiple business lines, dissimilar corporate cultures, cross border differences and workforce resistance to change.
- The most common technology solution used during M&A is a virtual data room (VDR), identified by 78% of respondents.
Seven value-creation lessons for dealmakers from the 2025 survey
1. Leverage the seller’s entrepreneurial spirit
To be successful when acquiring entrepreneurial companies, it is imperative to win over the seller’s hearts and minds. Pre-deal, create buy in by agreeing with the seller’s management the deal thesis about how the acquisition will create value for various stakeholders. Clearly communicate that logic to the seller’s employees. Post-deal, involve the seller’s management and employees in creating and tracking the execution of the agreed deal logic and synergy targets.
2. Build an ‘integration blueprint’
Integration blueprinting identifies where value is to be created and how the people, processes and technologies will be integrated. Then, integration planning entails detailing an integration programme to deliver the blueprint. The blueprint and integration planning should both be done pre-deal close, and include sufficient detail in describing the combined organisation, processes and technology structures.
3. Identify and execute the operating model for roll-ups
Roll-ups are characterised by acquiring numerous small companies in the same industry and combining some or all operating aspects of them to take advantage of economies of scale. Therefore, it is imperative to identify which operating model will create the most value for the roll-up. For example, will the operating model be more full integration with centralised functions or more stand-alone acquired entities operating relatively autonomously.
4. Build an M&A capability across the entire M&A process
Full lifecycle M&A skills remain scarce. The predominant in-house expertise focuses on the traditional aspects of dealmaking and financial analysis. Whereas post-deal integration management, communications and cultural integration in-house capabilities are lacking, but significantly contribute to post-deal transaction success. Moreover, combining full lifecycle M&A skills with a full lifecycle M&A playbook, containing reusable pre- and post-deal tools and templates, accelerates transactions and enhances pre- and post-transaction success.
5. Overtly track and report implementation progress and synergy capture
What gets measured, gets managed. A systematic results tracking process enhances post-deal integration execution and synergy capture by regularly identifying whether the transition is proceeding according to plan, identifies 'hot spots' before they are out of control, highlights the need for mid-course corrections, involves more people in the integration process, and sends a message that the new company’s culture is performance oriented.
6. Use the signing to close period wisely
Inevitably, the timeframe from signing to close is driven by financing requirements, regulatory approval and conditions of close in the Share Purchase Agreement (SPA). This timeframe creates a fixed timeline to help ensure effective day one readiness planning and preparation, while making as much progress with integration planning as possible pre-close to provide a fast start to execution on day one. This means the integration team, while mindful of legal restrictions, needs to be mobilised before signing and work alongside the deal team to be fully prepared for transaction close, starting integration implementation and synergy capture on day one.
7. Begin synergy capture on day one
Following the pre-closing development of an integration blueprint and a detailed integration plan, integration execution begins at closing. According to our survey the vast majority (75%) of integrations take an average of seven months. However, the duration of integration execution significantly increases for larger more complex deals, where the integration blueprint demands a multifaceted and large-scale combination of people, processes and systems across various business functions. Whereas the integration of small- and mid-market acquisitions can be achieved in 3-6 months or less.
Five new M&A risks caused by elevated economic uncertainty and how to respond
The main factor contributing to the recent slump in dealmaking is the economic policy uncertainty from the new US administration, which is having reverberations around the globe. Historically, one hundred percent economic and geopolitical certainty has never existed.
However, the recent unprecedented level of uncertainty is causing dealmakers to pause when considering both domestic and cross-border deals. A senior attorney leading the M&A practice at a major law firm asserts, 'There is always uncertainty when a new administration comes to power, but the uncertainty today is well beyond whatever I’ve experienced before.' [iii]
Here are five key risks associated with the elevated levels of uncertainty and how to respond to them.
Risk
Response
Valuation/price fluctuations
Collar the share price in the merger agreement to protect both the buyer and seller from large market fluctuations, establishing the minimum and maximum prices that will be paid per target share.
Include a purchase price renegotiation clause in the SPA, identifying factors that trigger price renegotiation.
Deal certainty
Keep the deal flexible with break clauses. Include break fees, when allowed depending upon the legal jurisdiction(s) governing the transaction.
Getting caught in the crossfire between the US and China
Pursue deals with firms based in the 'middle powers' (ie Europe, Southeast Asia, Middle East, Africa, and Central and South America).
Deal funding
Share funding risk with the seller by using stock for the consideration, instead of cash or debt.
Include post-transaction performance targets in the deal payment structure (eg clear earnout provisions). Acquire less than full ownership.
Fluctating supply chain barriers
During integration planning for the combined entity, identify alternative sources of materials and parts, diversified suppliers, and account for the cost of building backup inventory when calculating potential synergies.
Implement agile supply chain management by enabling supply chain managers to make rapid decisions. For example, if a logistics manager learns that a shipper expects a major disruption a quick decision to use another supplier could avert delays.
Tim Galpin is Senior Lecturer of Strategy and Innovation at Saïd Business School, University of Oxford. He is the author of Winning at the Acquisition Game: Tools, templates, and best practices across the M&A process, (Oxford University Press, 2020).
[i] Financial Times (28 March 2025). 'The M&A boom that wasn’t.'
[ii] Financial Times (2 April 2025). 'A biotech M&A revival is in the pipeline.'
[iii] Financial Times (24 March 2025). 'Dealmakers reassess hopes for Trump bump as M&A slips to decade low.'
