AI, geopolitics, and the next deal cycle
Two forces stand out in the outlook for transatlantic M&A: AI and geopolitics.
AI is already changing what buyers will pay. Almost three quarters of respondents—74%—say proprietary AI adds a valuation premium. The harder question is whether those premiums will hold for high-growth, pure-play AI companies.
AI re-rated
How tighter FDI screening and national-security reviews have materially altered transatlantic M&A strategies:
In the fast-paced field of AI investment, a paradox is emerging. Buyers are investing in AI and in AI infrastructure, but they are also investing in areas that are insulated from AI.
That includes consumer and business services, experiences, and asset-heavy businesses such as manufacturing. AI may enhance those businesses, but it does not replace what customers are buying.
Substantial acqui-hire deals, where buyers are targeting people and technology rather than the cash flow they are generating, are taking place, however, sometimes to the tune of hundreds of millions of dollars. Buyers are also trying to assess how established companies across the board are integrating AI into their business models. In the short term, this could dampen M&A activity in the technology and software sectors.
Geopolitics is the other major uncertainty. Yet respondents largely see volatility as something to price into a transaction rather than a structural break in the transatlantic relationship.
Large-cap dealmaking is expected to lead the recovery: 83% predict an increase in USD1B-plus deals over the next 12 months, compared with 68% in the lower mid-market.
Expected increase in transatlantic M&A activity over the next 12 months:
Large cap (USD1B+)
Upper mid-market (USD500M–USD1B)
Mid-market (USD250M–USD499M)
Lower mid-market (USD100M–USD249M)
If you are not investing directly in AI, you are likely investing in businesses that enable it, benefit from it, or offer something it can never fully replicate. That dynamic is driving significant private equity interest in sectors such as consumer and business services, sports and entertainment, and experience-based businesses. From home services and HVAC providers to wellness brands, live events, and sports properties, these companies deliver human interaction, trust, and real-world experiences that AI can enhance through better data, marketing, and operations, but ultimately cannot replace.
Eva Davis Partner, U.S.
We do a lot of work for big U.S. buyers and it is clear that trying to value technology companies that are not AI companies themselves is very difficult right now and that is having a significant cooling effect on technology M&A.
Mark Barron Partner, U.K.
The U.S. economy has been going gangbusters for a long time. That must be good for the global economy and all flows into increased M&A. I am positive about the future growth of the transatlantic corridor for M&A for as long as the American economy keeps knocking it out of the park.
Andrew Edge Partner, U.K.
Dealmakers are confident that the transatlantic corridor will remain intact over the longer term. However, there is an important caveat: the long-term outlook for transatlantic M&A also depends on the health of the U.S. economy.
Confidence in the transatlantic corridor
Next 12 months
Next three years
Next five years
Very confident
Next 12 months
Next three years
Next five years
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