M&A Market Pulse: Where Deals Are Actually Happening in 2025

Expert insights reveal which sectors are thriving despite tariff headwinds and economic uncertainty.

The M&A landscape started 2025 with considerable optimism before global tariffs implemented in April created widespread market uncertainty. Recent trade negotiations have helped stabilize conditions, and this week's surge in IPO and M&A activity signals renewed momentum for deal-making.

While overall transaction volume remains subdued, certain sectors are demonstrating remarkable resilience. Healthcare deals surged 101% quarter-over-quarter in Q1, while AI-driven technology acquisitions continue attracting premium valuations.

Healthcare: The Patent Cliff Creates Urgency 🩺

Industry experts consistently highlight healthcare as the most active M&A sector, driven by fundamental business pressures rather than market sentiment.

The Core Driver: Approximately 190 pharmaceutical patents expire by 2030, creating an inevitable wave of acquisition activity as companies scramble to replace lost revenue streams.

Target Profile: Smaller biotech firms and mid-market companies developing solutions in high-demand therapeutic areas—oncology, immunology, neuroscience, and metabolic disorders—represent the most attractive acquisition candidates.

A former Johnson & Johnson neuroscience executive described their recent $14 billion Intracellular Therapies acquisition as strategic necessity: "There's really almost a lock-and-key fit with the development priorities between J&J and the Intra-Cellular pipeline...This really replaces a kind of bespoke homegrown in-house initiative."

Geographic Considerations: Contract development and manufacturing organizations (CDMOs) are pursuing acquisitions to establish domestic production capabilities. Lonza's $1.2 billion acquisition of Genentech's California facilities exemplifies this trend—maintaining production capacity while potentially circumventing tariff impacts.

Technology: AI Remains the Dominant Theme 🤖

Artificial intelligence continues driving technology M&A across corporate, private equity, and venture capital transactions.

Recent Example: Palo Alto Networks' acquisition of Protect AI demonstrates the ongoing consolidation in cybersecurity and AI infrastructure. The combination creates comprehensive AI security capabilities spanning data protection through runtime defense systems.

An Amazon Web Services executive noted Palo Alto's strategic positioning: "Palo Alto Networks has done a better job in the partner ecosystem...working backwards from a GenAI application or even agentic AI options."

Investment Focus: Companies offering AI-driven security solutions, cloud architecture capabilities, and enterprise AI integration tools command premium valuations as organizations prioritize digital transformation initiatives.

Private Equity: Forced Adaptation

The challenging macroeconomic environment is creating unique dynamics in private equity markets.

Key Pressure Points:

• Extended hold periods due to limited exit opportunities

• Accumulated dry powder requiring deployment

• Portfolio companies reaching end-of-fund timelines

A former Bank of America director explained the situation: "There's a lot of private equity firms that need to exit certain positions. They just have to exit. They've reached the end of their hold period. I do think that there's some built-in M&A pipeline for the next year or so."

This forced selling may create opportunities for strategic buyers and other private equity firms with available capital.

Market Outlook: Adaptation as Strategy

Interest Rate Environment: The Federal Reserve's steady rate policy continues constraining deal financing, though established lenders remain active for quality transactions.

Tariff Impact: While creating uncertainty, trade policies are forcing companies to consider strategic acquisitions for supply chain resilience and geographic diversification.

Sector Rotation: Dealmakers are increasingly focused on sectors with defensive characteristics—healthcare necessity, technology infrastructure, and businesses with pricing power.

Strategic Implications for Deal-Makers

For Buyers:

• Healthcare presents the most compelling fundamental drivers for sustained activity

• Technology acquisitions require clear AI integration thesis beyond generic transformation narratives

• Geographic arbitrage opportunities exist in manufacturing and distribution

For Sellers:

• Healthcare and AI-focused technology companies command premium valuations

• Strategic buyers often outbid financial buyers given integration synergies

• Timing remains critical as market windows can shift rapidly

For Investors:

• Private equity exits may create attractive secondary opportunities

• Healthcare patent cliff timeline provides predictable deal flow

• AI infrastructure investments continue attracting growth capital

The Bottom Line

Despite macroeconomic headwinds, specific sectors demonstrate strong M&A fundamentals. Healthcare deals are driven by patent expirations creating acquisition necessity, while AI continues commanding premium valuations across technology sectors.

Successful deal-makers are adapting strategies to emphasize defensive growth characteristics, supply chain resilience, and technological differentiation rather than purely financial engineering.

The market may lack broad-based enthusiasm, but targeted opportunities exist for prepared participants with clear strategic rationale and patient capital deployment approaches.

If you’re looking to join our community of paid members where we provide guidance into your acquisition then please feel free to find more information here.