Last year started with a strong degree of optimism for a rebound in mergers and acquisitions (M&A) driven from the US, with the anticipation of a pro-business, anti-regulation approach by President Donald Trump; however, the reality was different and M&A appetite was hard hit.

With some exceptions, law firm Herbert Smith Freehills Kramer (HSF Kramer) says, these corporate activities were particularly impacted on by the introduction of tariffs and unpredictability of policy direction.

The year then turned with a surge of M&A in the third quarter, which marked one of the strongest quarters for M&A since 2021.

According to HSF Kramer’s latest ‘Global M&A Outlook’ report, sufficient equilibrium was reached for parties to pick up dealmaking plans once there was some degree of clarification on policy and direction of travel.

The outlook finds that corporates were at the forefront of this resurgence, executing transformative transactions driven by long-term ambitions and determination to close deals that had been under consideration for some time.

Private equity was by no means absent though and achieved some significant deployments of capital, although in many cases had competing priorities.

HSF Kramer says megadeals also drove the market in 2025, lifting deal values to $4.3-trillion by the end of the year, up nearly 40% on 2024, despite overall volumes having been 2% lower year-on-year.

The firm explains that two themes defined 2025 and frame the outlook for the year ahead: the heavy lifting required to get deals done, with resilience and creativity needed to get deals across the line; and the ongoing regulatory risk, with more regulators, more regulation and negative risks globally.

HSF Kramer M&A head Gavin Davies says the M&A market faced a “complicated picture” in 2025, with many buyers having remained in exploratory phases with no serious near-term prospects of completing a deal, while others were locked in "situationships" with protracted negotiations.

“Yet, in the final tally we saw a significant number go official and commit to transformative deals” Davies states.

Despite early uncertainty, the market rebounded strongly in the second half of 2025 driven by strategic ambition and megadeals.

In the report, lawyers from across HSF Kramer's global offices examined key legal challenges and opportunities in the current M&A environment, including how tariffs and geopolitics are shaping deals, how dispute risk can be reduced, the growing influence of AI on transactions and how activists are influencing transaction strategies.

“In 2025, tariffs and geopolitics moved from background factors to the centre of global M&A. Trade renegotiations, national security priorities and expanding foreign direct investment regimes reshaped deal terms and execution risk,” says HSF Kramer M&A partner Rebecca Maslen-Stannage.

She adds that successful execution now requires the ability to anticipate political shifts, navigate complex multi-jurisdictional regulatory pathways and incorporate tariff and supply chain resilience directly into deal terms.

In respect of activism, HSF Kramer M&A partner Caroline Rae points out activism remained a powerful force in global M&A in 2025. She expects activists to continue having a significant influence on M&A – driving change, shaping strategy, and blocking deals where they think the price or strategy is not right.

HSF Kramer US corporate managing partner Ernest Wechsler shares a similar sentiment, saying that deals signed required more than negotiation last year.

"Valuation gaps, heightened regulatory scrutiny and rigorous diligence added new layers of complexity. We saw many dealmakers draw on relationship-led strategies and innovative structures to overcome uncertainty and drive forward deals,” he notes.

In respect of AI, HSF Kramer Asia M&A head Malika Chandrasegaran says 2025 marked the year that AI became a deal-shaping force, influencing both acquisition decisions and deal execution.

“When using AI on a transaction, the winners in 2026 will be those who harness AI to accelerate diligence and decision‑making while carrying out careful oversight to ensure accuracy and manage limitations."

Looking ahead to 2026, HSF Kramer does not expect an immediate return to the fast-paced, competitive private equity-led auctions of previous years. However, the firm anticipates that this year will be an active and dynamic year for dealmaking.