Merger and acquisition activity in the United States reached its peak in 2021, but a slowdown occurred as SPACs faced challenges and the Biden administration adopted a tougher stance on large-scale mergers. However, experts anticipate a reversal of this trend in 2025 with the Federal Reserve expected to lower interest rates and a more M&A-friendly Federal Trade Commission coming into play. Goldman Sachs analysts predict a resurgence in larger-scale deals in the coming year, with Mondelez International reportedly considering the acquisition of chocolate giant Hershey Inc.
Looking ahead to 2025, Fitch Ratings has identified several sectors ripe for acquisitions, including homebuilding, construction, aerospace, gaming, leisure, healthcare, banking, and technology. Within these industries, mid-size companies with market caps ranging from $5 to $12 billion are likely targets for M&A activity.
In the consumer sector, the coffee industry is facing challenges with long wait times at popular chains like Starbucks and Dunkin’. This has created an opportunity for artisan coffee chains like Dutch Bros to gain market share. Dutch Bros, known for its quick drive-thru service and quality coffee, has experienced significant growth and is seen as a potential takeover target due to its strong financial performance and brand recognition.
Walgreens, a long-standing acquisition target, may finally see a deal materialize in 2025 as private equity firm Sycamore Partners explores the possibility of taking the company private. With Walgreens’ stock price declining in recent years, a private market acquisition could be on the horizon.
In the technology sector, companies like Roku and Zoom have experienced fluctuating stock prices but remain attractive targets for acquisition. Roku, a provider of streaming hardware and software, has seen significant growth in gross profits, making it an appealing prospect for larger players in the streaming industry. Similarly, Zoom’s video conferencing services have gained popularity, positioning the company as a potential acquisition target for tech giants like Google, Microsoft, or Apple.
While banking ETFs may not be acquisition targets themselves, the small and mid-size bank sector is expected to see consolidation in the coming years. The S&P Regional Banking ETF has received a boost following deregulation efforts, indicating a potential uptick in bank mergers and acquisitions. Investing in this ETF could provide exposure to the overall M&A trend in the banking sector.
Overall, 2025 is poised to see a resurgence in M&A activity across various sectors, driven by favorable market conditions and strategic opportunities for companies looking to expand their reach and capabilities.
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