Global Merger and Acquisition Activity Declines in Q3 as Borrowing Costs Rise

Global merger and acquisition (M&A) activity fell to $993 billion in the third quarter, decreasing 41% from the previous quarter and marking the first time since Q2 2025 that the total has dipped below $1 trillion, according to LSEG data. Major transactions included Banca Monte dei Paschi's $32 billion acquisition bid for Banco BPM and Gold Fields' $25.7 billion offer for Northern Star Resources. Despite projections regarding growth from the booming artificial intelligence and data center sectors, rising energy costs are intensifying inflation and altering interest rate expectations. The benchmark 10-year U.S. Treasury yield reached 5.34%—the highest since 2002—after experiencing its largest quarterly increase this century. John Collins, Morgan Stanley's global head of M&A, commented that while higher yields can complicate valuations, the overall impact is difficult to quantify. Year-to-date, global M&A spending has risen 28% to $3.9 trillion, the highest for this timeframe since 2001. Corporations are actively seeking growth through strategic technology and market expansion, with significant investments in the tech sector contributing to a quarter of all global M&A activity. In contrast to the downturn in U.S. and European deals, Asia-Pacific M&A rose to $242 billion, reflecting an 8% increase from Q2 and a 36% annual rise. Despite normalization from an extraordinary second quarter, strategic pursuits remain robust according to experts. Cross-border transactions are also thriving, with U.S. firms increasingly eyeing acquisitions in Europe, while international investors gauge opportunities in the U.S. amid high growth potential. Recent IPO activity, primarily in tech, has invigorated M&A, as companies leverage their public equity for acquisitions, highlighted by SpaceX's purchase of AI startup Cursor following its $2 trillion valuation debut. Although some caution has emerged amid rising diesel prices and interest rates, which could stall new tech issues, the overall outlook remains optimistic as strong trends in AI continue to drive market activity.