By Jacob Sonenshine

While mergers and acquisitions have surged this year, the party has only just begun.

The increase in deals could very well extend into the next couple of years, even though buyers have already spent heavily. This has important, and positive, implications for stock investors.

Global M&A has hit $3.68 trillion so far this year, up 42% from the same period last year, according to London Stock Exchange Group. That puts aggregate deal value on pace to hit about $4.3 trillion, up from last year's $3.5 trillion.

Financials, industrials, materials, and technology, are behind the increase. The former three benefit from a strong economic outlook, while large tech companies are eager to scoop up the many smaller players that have capabilities in emerging areas such as artificial intelligence.

That is no surprise. Barron's predicted in August that many of the challenges that had caused deal activity to hit bottom in 2024 would subside this year.

Now, the landscape is different. The stock market has continued to rise as the Federal Reserve has pushed interest rates lower, while the economy has continued to grow. The trade war has ebbed, proving to be less of an obstacle to the economy than feared.

The result is that buyers can borrow money at lower rates to make acquisitions. The deals can yield acceptable returns because most companies' earnings are growing.

While the snag is that money doesn't grow on trees -- at some point, most companies that have wanted to buy new assets will have already done so -- there is still the potential for the number and value of transactions to keep rising.

Morgan Stanley investment strategist Michelle Weaver expects global deal activity to reach $7.8 trillion by 2027. First off, she said, the majority of analysts she surveyed at the bank expect a moderate increase in deals over the coming 12 months.

Plus, Weaver estimates, private-equity funds have $4.2 trillion of cash that their investors are pressuring them to put to work. The funds usually pay for their acquisitions with a combination of cash and borrowed money, so that could translate into roughly $8 trillion of total buying power. While that amount wouldn't pour into the market all in one year, it would bulk up buyout spending over the medium term.

It makes sense for private equity to unleash those funds because the conditions are in place to turn those investments into winners. As long as rates don't surge, the economy and corporate profits can keep growing, as companies have made clear during the third-quarter profit-reporting season.

"Management commentary is becoming increasingly positive, suggesting that the private markets flywheel can accelerate," Weaver writes.

Potential deals abound. The $2.1 billion AI company C3.ai, which has lost most of value over the course of its almost five-year life in the public market, could fit under the roof of a Big Tech company, as Barron's has suggested. Reuters has reported the company is now exploring a sale. Elsewhere, reports have surfaced that GitLab, with a market capitalization of $7.8 billion, could sell to the $69 billion Datadog.

Tons of companies with smaller market values could be takeover targets. They usually sell for a significant premium over their stock prices, which means big gains for shareholders.

Investors should keep their eyes peeled and enjoy the party.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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November 12, 2025 12:14 ET (17:14 GMT)

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