M&A Market update: European outlook for 2025
Michelle Mullany · Posted on: September 16th 2025 · read
As we are firmly underway into the second half of 2025, the merger and acquisition (M&A) landscape across Europe has continued to transform, shaped by changing macroeconomic conditions, the rise of technology and the ongoing impact of Private Equity (PE) capital deployment.
Whilst larger deals remain more sensitive to global uncertainty and interest rates, the small and mid-cap market continues to show resilience and robust activity. Our head of deal origination, Michelle Mullany, recently spoke with our colleague Olivier Willems, Corporate Finance Partner at Baker Tilly Belgium to discuss the real sentiment of M&A across Europe.
Small and mid-cap deals – driving momentum
As mentioned above, despite broader economic challenges that have risen in 2025, deal flow in the small to mid-cap segment remains strong. This is backed up by similar feedback from colleagues, indicating that this part of the market remains robust and active. PE firms are still sat on significant dry powder, and strategic buyers remain active – especially when targeting assets that align with long-term digital transformation and growth strategies.
There has also been a considerable uptick in activity around divestitures and strategic asset sales; Corporates are reshaping their portfolios, and buyers (both financial and strategic) are ready to act when the right assets become available.
Small and mid-cap deals – driving momentum
"As mentioned above, despite broader economic challenges that have risen in 2025, deal flow in the small to mid-cap segment remains strong. This is backed up by similar feedback from colleagues, indicating that this part of the market remains robust and active. PE firms are still sat on significant dry powder, and strategic buyers remain active – especially when targeting assets that align with long-term digital transformation and growth strategies."
There has also been a considerable uptick in activity around divestitures and strategic asset sales; Corporates are reshaping their portfolios, and buyers (both financial and strategic) are ready to act when the right assets become available.
Sector spotlight: What’s hot?
The technology, media and telecom (TMT) space, especially software, is at the heart of the growing surge, with professional services sector also seeing increased deal activity, driven largely by the integration of AI and digital tools. Whether it’s consulting firms, law firms, IP advisors, or CPA firms, digital transformation is reshaping how these firms operate, which investors are taking notice of.
AI is a particular catalyst, as it’s driving new opportunities for value creation, making small and mid-sized businesses in this space increasingly attractive to PE firms keen to build platforms or bolt-on acquisitions that benefit from scalable innovation.
Strategic vs. PE buyers: A competitive landscape
Whilst PE continues to deploy capital, strategic buyers are demonstrating increasing competitiveness, particularly in sectors where they bring deep expertise. In competitive processes, strategics are securing wins more frequently than they did a few years ago.
However, for PE firms with existing platforms, the dynamic shifts. Bolt-on acquisitions in sectors where the firm has established expertise and operational infrastructure enable PE to operate in a quasi-strategic buyer capacity, often giving them a competitive advantage.
Deal structuring and timelines – a shift in pace?
One noticeable change in the current market has been the pace of deal execution which has slowed down. Over the past six months, we’ve seen that transactions are taking longer to reach completion. Banking and finance timelines have extended slightly, and for companies with export dependencies, new trade barriers and tariffs have made buyers more cautious.
Nonetheless, these developments do not represent fundamental shifts in the market; rather, they reflect heightened diligence and an increased emphasis on deal certainty. Geopolitical uncertainty continues to weigh more on large-cap deals than mid-market transactions.
PE and debt markets: Active but selective
PE remains a key force in the market and dry powder levels are high. Transaction activity in the small to mid-market, both exits and acquisitions – continues with minimal disruption. However, in the mid to upper-mid market, some hesitancy is arising. A number of potential sellers, particularly in places such as France, are adopting a wait-and-see approach, concerned that entering the market prematurely may result in suboptimal valuations. This patience doesn’t reflect a lack of demand, but rather an attempt to strategically time exits more in the light of current macroeconomic conditions.
Cross-border transactions
Cross-border M&A remains an attractive growth strategy, particularly for European businesses looking to expand into the UK. Despite Brexit-related difficulties, the UK remains one of the most transactional markets in Europe, with relatively smoother deal processes, compared to markets like Germany.
From a sector perspective, TMT and professional services once again stand out as particularly attractive. Buyers are looking for local presence, market knowledge and synergies with existing continental European operations.
Market outlook
Looking ahead at the overall M&A outlook it remains optimistically positive for both domestic and cross-border. Capital is still available, interest rates are at sustainable levels, and banks continue to support leveraged deals. The pace of strategic acquisitions is increasing, and technology remains a critical driver of activity. This is apparent as many businesses are preparing for a shift, as AI and digital transformation begins to transform traditional industries.
Valuations are remaining resilient, especially for high-quality assets, despite us often surprised at how well top-tier businesses are holding value, this is largely due to the scarcity of large, high-quality assets coming to market and the persistent capital overhang in PE.
We’re also seeing strong interest in companies operating in growth sectors, with recurring revenue models, international scalability, and seasoned management teams. A strong USP and clear strategic roadmap are key differentiators in the market.
While the broader economy still presents areas of uncertainty, the European M&A market is showing resilience and innovation. Buyers are becoming increasingly strategic, technology is reshaping what makes a company valuable, and capital continues to seek opportunities. For sellers and acquirers alike, the key will be timing, readiness and a clear growth trajectory.
