Global merger and acquisition activity fell sharply during the third quarter as rising borrowing costs, energy prices and market volatility interrupted one of the strongest periods for corporate dealmaking since 2021.
Data from LSEG put announced transaction value at about $993bn during the quarter, down 41% from the previous three months. It was the first quarter since mid-2025 in which deal value dropped below $1tn.
The slowdown followed an unusually active first half rather than a collapse across the full year. Global deal value for the first nine months reached approximately $3.9tn, 28% higher than the same period in 2025 and the strongest start to a year since 2021.
Large transactions have been particularly sensitive to changing financing conditions. Companies considering acquisitions worth tens of billions of dollars must finance longer integration periods and convince shareholders that expected returns remain attractive when debt costs rise. The number of very large deals therefore fell during the third quarter even though strategic interest in acquisitions remained substantial.
Energy market disruption has added another variable. Oil prices above $100 a barrel have lifted inflation expectations and changed assumptions about central bank policy, pushing up the cost of debt while buyers seek greater certainty over future earnings. Equity market volatility can also complicate share funded transactions because the relative value offered to each group of shareholders can move quickly.
Private equity has remained an important source of activity. Deals backed by financial sponsors reached record levels across the first nine months, reflecting pressure on investment funds to deploy capital after several years in which higher rates constrained both acquisitions and exits.
Cross border transactions have also remained comparatively resilient, supported by strategic demand for technology, infrastructure and other assets where companies want greater scale. The result is a more selective market rather than a closed one. Transactions with clear operational or financial logic can still progress, but boards are subjecting financing structures and valuation assumptions to greater scrutiny.
The change affects professional services businesses that benefited from the first half boom. Investment banks, lawyers, accountants and transaction advisers earn substantial fees from large acquisitions, and workloads can fall quickly when deals are postponed or abandoned. Companies relying on acquisitions to meet growth targets face the same uncertainty from a different direction.
Deal activity can recover quickly when financing conditions improve, and advisers continue to report substantial pipelines. The third quarter nevertheless shows how dependent the earlier rush was on confidence around funding, valuations and execution. Boards entering negotiations now face a market in which debt costs, inflation exposure and integration risk have returned to the centre of the acquisition case.
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