The New Shape of M&A: How global macroeconomic headwinds reformed transaction execution

8–13 minutes

The five years from 2021 to 2026 have done more to change how M&A deals get done than any period since the global financial crisis. The headline numbers tell only part of the story; global M&A deal value reached $4.7 trillion in 2025, up 43% on the prior year and around 20% above the ten-year average. Deal volume, however, stayed roughly flat at about 33,000 majority transactions, down from a 2021 peak of approximately 41,300. The market has not rebounded so much as split into two halves: activity is concentrating in the largest deals, run by the best-capitalised buyers.

Beneath those aggregate figures sits a more interesting story; the way deals are put together has changed. Financing packages look different. Deal contracts look different. The path to regulatory clearance looks different; even the people buying the assets look different. This post sets out what that new shape looks like, why the macro environment produced it, and where the risk has settled.

Key elements of the new shape:

Deal value heavily concentrated in megadeals (above $5 billion), with a record 60 transactions above $10 billion announced in 2025
Reverse termination fees, which are payments a buyer makes to a seller if the deal collapses after signing, agreed in roughly 65% of deals in 2025, up from 56% three years earlier
“Ticking fees”, which compensate sellers for delays in closing, becoming more common in long-running regulatory processes
US private credit dry powder, meaning capital raised but not yet deployed, at a record $146 billion at the end of 2025
Private equity sponsors putting in roughly 46% of the deal price as equity in 2025, down from a 2023 peak of 51.1%
Over 50 foreign direct investment screening regimes now in place across more than 100 jurisdictions
Sovereign and Gulf investors (HOF Capital, BlueFive Capital, Mubadala, PIF) appearing more often as lead buyers of European trophy assets
Greater reliance on take-privates, carve-outs and divestitures rather than share-for-share public deals

The macroeconomic backdrop

The pressures that produced the new shape of M&A are by now familiar, but worth putting together. The Federal Reserve’s tightening cycle between 2022 and 2024, followed by only modest rate cuts through 2025, raised the cost of acquisition debt to levels that no longer worked for a meaningful share of the old leveraged buyout playbook. Tariff policy under the second Trump administration, particularly through 2025, added a fresh layer of volatility to cross-border deal models. Boards have had to rethink their assumptions about supply chains, market access and the cost of inputs. Geopolitical fragmentation, the war in Ukraine, instability in the Middle East and the broader cooling of US-China economic relations have done the rest. Together, these forces have pushed “economic security” to the centre of merger control on both sides of the Atlantic.

The result is a market in which strategic conviction still exists in abundance, but in which the execution risk has moved. Where in 2019 the central concern was usually price, today it is closing. The ability to get safely across a longer, more conditional, more politically exposed gap between signing and completion has become the central commercial question.

Financing: a rebalancing of debt, equity and source

The financing market that supports M&A in 2026 looks substantively different from the one that supported it in 2021. Three shifts stand out.

Private credit has established itself as the default financier of large leveraged buyouts. The share of buyout financings above $1 billion provided by banks fell from roughly 80% before 2022 to 39% in 2023, before recovering to just over 50% in 2025 as banks pushed back to win lost ground. The structural point, however, is that direct lenders have become a permanent part of the financing landscape rather than a stopgap. US direct lending dry powder reached a record $146 billion at the end of 2025. Large funds such as Bain Capital Credit, Blue Owl and Ares now routinely underwrite the whole financing on their own or in clubs, with execution timelines measured in weeks rather than months.

Sponsor equity contributions have begun to normalise, though not back to the easy-money era. Equity tickets rose to 51.1% of deal value in 2023 as sponsors absorbed the impact of higher rates and tighter credit. They have since drifted back to around 46% in 2025. That figure remains higher than the pre-2022 norm, and reflects a financing market where leverage of 4.0x to 5.5x EBITDA is once again attainable, but at a meaningfully wider all-in cost.

Consortium structures have spread at the top of the market. Where a single sponsor would historically have bid alone for a sub-$10 billion target, the largest 2025 take-privates have routinely involved two or three sponsors plus a strategic minority or sovereign anchor. The $55 billion Electronic Arts take-private, the largest all-cash sponsor take-private in history, is the clearest example. The same architecture is visible in the Porsche / Bugatti Rimac divestiture and across a wave of European luxury, energy and infrastructure transactions. Sharing risk among co-investors has become a structural answer to the equity cheque size that megadeal economics now demand.

Deal documentation: pricing the runway

The most visible change in legal practice has been in how deal documents now price the gap between signing and closing.

Reverse termination fees are the headline. These are payments a buyer agrees to make to the seller if the deal collapses after signing, typically because the buyer cannot get regulatory clearance or cannot raise financing. Once a feature of only the largest, most heavily regulated, antitrust-exposed transactions, they were agreed in roughly 65% of deals in 2025, up from 63% in 2024 and 56% three years before. The fees themselves are also rising. A 4% to 7% reverse termination fee is now standard where antitrust risk is the principal execution concern. The $3.2 billion fee (10% of deal value) disclosed in Alphabet’s proposed acquisition of Wiz, announced in March 2025, has become a reference point for the upper end of the market. The $5.8 billion regulatory break-fee sitting on top of Netflix’s December 2025 agreement with Warner Bros Discovery, a so-called “hell or high water” commitment under which Netflix agreed to bear almost all the regulatory risk, is a still more extreme example of the same trend.

Ticking fees are the quieter but increasingly important counterpart. Where a reverse termination fee compensates the seller if the deal breaks, a ticking fee compensates the seller’s shareholders for the time value lost while the deal is alive but unclosed. This is typically done by automatically raising the offer price after a defined trigger date. Examples from 2023 onwards have moved these fees out of the niche and into the mainstream of European public M&A, particularly where the regulatory runway is long.

Long-stop dates, which are the deadlines beyond which an unfinished deal can be abandoned, have moved from a back-of-the-document mechanic to a front-of-the-document negotiation. It is now common to see signing-to-closing windows of 18 months or more on cross-border strategic deals, with automatic extension provisions tied to specific regulatory outcomes. Sellers are responding by pricing in the optionality being granted to buyers through tighter interim-period covenants and, where they can extract them, gross-up mechanics for value lost to delay.

The cumulative effect is a deal document in which the terms of waiting have become as commercially negotiated as the terms of buying.

Regulatory clearance: the multi-jurisdictional baseline

Perhaps the most underappreciated shift in transaction execution has been the spread of foreign direct investment (FDI) screening regimes. These are processes under which a host country reviews a proposed foreign acquisition for national security concerns. There are now over 50 such regimes across more than 100 jurisdictions. The meaning of “national security” has expanded well beyond traditional defence to include advanced technology, semiconductors, AI, data, critical minerals and a widening range of supply chain inputs. In the EU, the 2025 reform package has pushed member states towards mandatory screening, towards coverage of intra-EU investments controlled by third-country persons, and towards a common minimum set of sensitive sectors. In the US, the Committee on Foreign Investment in the United States (CFIUS) has been complemented by a new “Reverse CFIUS” outbound regime focused on specified Chinese technologies. The administration has also shown increased willingness to comment publicly on live merger reviews.

The practical consequence is that multi-regime filing strategy has become a first-day issue rather than a closing-conditions afterthought. On a representative cross-border deal involving European industrials and Gulf or US capital, of which the Porsche / Bugatti Rimac transaction is a clean recent example, clearance routinely involves the European Commission, the German Federal Cartel Office (Bundeskartellamt), one or more national FDI regimes (Germany’s AWV, Italy’s golden power regime, France’s R.151 process, Croatia’s screening framework), and often a CFIUS notification on the buy-side as well. Remedies planning, which means thinking through divestitures, behavioural commitments and ownership ring-fences, is now built into the deal architecture from the first sign-off paper rather than bolted on at week 22 of clearance.

Deal architecture: take-privates, carve-outs and the rise of sovereign capital

Three structural patterns have crystallised in response to all of the above.

Take-privates have been the dominant vehicle for putting large equity cheques to work in a market where public valuations have lagged private benchmarks. The Electronic Arts take-private is the standard-bearer, but the same pattern has been repeated across consumer, software and life sciences through 2025 and into 2026.

Carve-outs and divestitures have become the corresponding story on the sell side. Listed industrial groups whose share prices reflect conglomerate discounts have responded by simplifying. Porsche’s exit from Bugatti and Rimac is one example. A wider wave of automotive, energy and consumer-goods divestitures sits behind it, often run as one-on-one or limited-auction private processes rather than broad sale processes, both for speed and to minimise market noise.

Sovereign and Gulf capital has moved from co-investor to lead acquirer. GCC deal value in 2025, to 1 December, exceeded the entirety of 2024 by 170%. The UAE and Saudi Arabia were the largest markets by value, at approximately $60.4 billion and $8 billion respectively. Vehicles such as HOF Capital, BlueFive Capital, Mubadala, ADQ and PIF are now regular names on the front pages of European deal announcements, often anchoring consortia where Western institutional capital has been more cautious. The combined effect is that the universe of buyers for a European trophy asset in 2026 looks materially different from the universe of buyers in 2019.

The law firms behind the new shape

The Magic Circle and US elite firms have reorganised their practice groups accordingly. Cross-border M&A teams now sit shoulder to shoulder with sanctions, export-control, FDI and merger control specialists in a way that was unusual a decade ago. Linklaters, Clifford Chance and Freshfields continue to dominate seller-side mandates on European listed corporates. Latham & Watkins, Kirkland & Ellis and Paul Weiss retain a clear lead on sponsor-led take-privates. White & Case and DLA Piper have become regular fixtures on Gulf-anchored consortium deals, reflecting both their Middle East footprints and their cross-border capacity. The Hogan Lovells / Cadwalader combination announced in December 2025, the largest law firm merger by combined revenue in history, can itself be read as a response to the structural shift towards complex, regulated, multi-jurisdictional transaction work.

Questions to Ask:

Will the 65% rate of reverse termination fees observed in 2025 become a permanent feature of the deal-documentation landscape, or will it normalise back towards historical levels if regulatory predictability improves under a more settled US administration?

Is the rise of sovereign and Gulf consortia structurally durable, or is it contingent on the continuation of current oil and gas prices and on the political conditions that have made European trophy assets accessible?

And if private credit dry powder continues to outpace deployment, will we see a return to truly borrower-friendly loan terms across the middle market? If so, what does that do to the bargaining position of the next generation of LBO targets?