In 2024, the U.S. mergers and acquisitions (M&A) landscape experienced a notable resurgence, setting the stage for continued growth in 2025.

Deal Volume and Value: Through September 2024, both private equity (PE) and corporate M&A deal volumes increased by 17% year-to-date compared to 2023. Despite this uptick, momentum decelerated later in the year due to elevated uncertainty, in part related to the outcome of the presidential election.

In 2025, consensus among analysts is for a 10% increase in total U.S. M&A deal volume, building on an expected 13% advance for full-year 2024. This projection reflects optimism for sustained M&A activity.

Factors such as declining inflation, flat or lowering interest rates, and recovering valuations are anticipated to drive M&A activity. These conditions are expected to enhance CEO confidence and deal-making appetite.

While 2024 marked a recovery phase with significant gains in deal volume and value, the anticipated growth in 2025 indicates a continuation of this positive trend.

The consistent valuations and projected increases suggest that both private equity and strategic acquirers are positioning themselves to capitalize on favorable economic conditions and sector-specific opportunities.

In the section below, we consider the M&A outlook for several key industries in the Central and Southern United States.

Aerospace

Aerospace M&A continues to follow a streamlining approach, divesting non-core assets to strengthen balance sheets and gaining cash for modernizing and strengthening core competencies.  Small to mid-sized aerospace firms will look for strategic consolidation opportunities.

Commercial Aviation Recovery: Airlines are rebuilding fleets with more fuel-efficient aircraft, prompting OEMs and suppliers to consolidate for efficiency. Demand for new aircraft is at a historic high with the aerospace industry facing the equivalent of nine years of production backlog.  Manufacturers will be valuable partners to help open up this opportunity.

Defense Spending: Geopolitical tensions continue to fuel investments in defense, with companies pursuing acquisitions to bolster capabilities in hypersonics, autonomous systems, and space technologies.

Supply Chain Optimization: Persistent supply chain challenges may lead to vertical integration strategies among suppliers and manufacturers.

Boeing finalized its acquisition of Spirit Aerosystems to alleviate supply chain issues.  However, Boeing continues to face headwinds from leadership changes to labor strikes.

Chemicals

The Chemicals industry deal activity showed promising signs in the second half of 2024 with the trend expected to continue into 2025.  Economic and political headwinds have eased in the US, and with the energy infrastructure, access to raw materials and low cost feedstock, all contributing to make chemicals in the US an attractive market.

Sustainability Initiatives: Increasing regulatory pressures and customer demand for sustainable products are pushing firms to acquire technologies and capabilities in green chemistry and recycling.

Specialty Chemicals Growth: The demand for high-value specialty chemicals in sectors like healthcare, electronics, and agriculture continues to increase.

Restructuring: Some companies may divest non-core assets to streamline operations, creating opportunities for focused acquirers.

Under the new administration, chemical manufacturing reshoring is expected to increase, changing the supply chain dynamic.  Companies should remain flexible and watch for opportunities in the changing environment.

Energy

The oil and gas industry has experienced significant industry consolidation, particularly in the upstream category.  Diamondback’s acquisition of Endeavor Energy closed in September and ConocoPhillips closed its purchase of Marathon Oil in November, just to highlight a couple of megadeals in 2024.

Midstream and Oilfield Services are now experiencing a similar consolidation environment.  Companies are looking to M&A for infrastructure improvements in transportation, processing plants, and storage facilities.

Energy Transition: Companies are acquiring renewable energy assets, carbon capture technologies, and hydrogen projects to align with long-term decarbonization goals.

Consolidation: Mid-size players may merge to achieve scale and operational efficiencies, particularly in the shale sector.

Asset Divestitures: Major oil firms continue to divest legacy fossil fuel assets, creating opportunities for smaller operators and private equity investment.

The new administration is expected to focus on traditional energy, with possible energy policies to include drilling expansion, regulation reduction, and a decrease in renewable energy initiatives. However, the demand for energy continues to increase.

Engineering and Construction

To meet growing housing needs, residential construction is expected to grow near 10% in 2025. Non-residential construction still feels the pain of high interest rates and margin compression, with many real estate development projects on hold until there is a more favorable rate environment that reduces financing costs and makes the deal pencil. Construction around education, healthcare, data centers, and lodging may experience growth and M&A opportunities.

Grid modernization and infrastructure are also subsectors expecting strong growth.

Infrastructure Boom: Federal infrastructure spending remains a catalyst for consolidation among contractors, engineering firms, and material suppliers.

Sustainability: Green building technologies and energy-efficient construction materials are driving acquisition interest.

Labor Shortages: Firms are seeking acquisitions to mitigate skilled labor shortages and expand geographic reach.

Companies also look to M&A for technological advancement to improve productivity, customer experience, and operations.

Healthcare

With significant strategic and private equity capital available for acquisitions and potential future rate cuts, M&A activity in the healthcare sector is expected to accelerate in 2025.

The Physician Medical Groups subsector was first in deal volume this year through Q4 2024 and second in deal value behind Pharma Services.  Tech solutions for administrative efficiencies in addition to cyber security improvements remain areas of investment activity.

Digital Health: Investments in telemedicine, AI-driven diagnostics, and patient management platforms are accelerating.

Pharmaceutical Consolidation: Companies are pursuing acquisitions to strengthen pipelines, particularly in oncology, gene therapy, and rare diseases.

Outsourcing and Services: Demand for contract research organizations (CROs) and third-party service providers continues to grow.

The incoming administration is viewed generally as pro-business and the optimism surrounding new policies may also spur deal activity in the coming year.

Industrial Manufacturing

Deal activity for Industrial Manufacturing is expected to increase.

Companies are anticipating a more favorable regulatory environment, particularly with environmental and antitrust issues; however, it will also be important how the administration handles tariffs and their impact on manufacturing and consumer behavior.

Automation and AI: Acquisitions of firms specializing in robotics, IoT, and AI are likely as manufacturers prioritize smart factory initiatives.

Reshoring Trends: Companies are acquiring domestic production capabilities to mitigate risks from global supply chain disruptions.

Sustainability: Firms are investing in energy-efficient manufacturing processes and renewable energy adoption.

Transportation and Logistics

The last half of 2024 was flat compared to the first half of 2024 in deal volume, with an increase in deal value during the second half of the year.

The conversations around tariffs and the new administration could indicate a negative impact on freight with a possible positive impact on trucking.  Change in trade policies could also affect supply chain activity and energy policies impacting fuel prices.

Electric Vehicles (EVs): Automakers and suppliers are aggressively pursuing deals to secure battery technology and EV infrastructure.

Logistics and Warehousing: The accelerating transition from brick and mortar to e-commerce continues to drive consolidation in logistics, last-mile delivery, and warehousing.

Sustainability Goals: Companies are acquiring assets to enhance their green transportation capabilities, including rail and shipping investments.

Deal activity is expected to increase in transportation given the improvement of investor confidence and the positive outlook on current and future policies and economic conditions.  Technological advancements in logistics, trucking consolidation, and last mile logistics for the railroad sector are areas to watch for M&A activity.

Sources: This report has been compiled from reports and research including federal data, independent analysis, Bain & Company, EY, Federal Reserve, Reuters, Janes Capital, US Chamber of Commerce, Oilprice.com, Kaufman Hall, DC Advisory, Kiplinger, PCE-Companies, Mergermarket, RL Hulett, Bass, Berry, & Sims, Roll Call, PricewaterhouseCoopers, Deloitte, HPC, Charles Aris and SDR.

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