Despite global geopolitical uncertainty, volatile energy markets, and the uneven disruptive impact of artificial intelligence, companies are actively pursuing mergers and acquisitions, which remain a core element of their long-term strategies, according to Tom Miles, a senior M&A leader at Morgan Stanley. This sentiment is supported by recent data from LSEG, which shows that global M&A deal value surpassed $1.2 trillion in the first quarter, reaching a record high, seemingly undeterred by fresh conflict in the Middle East.
"Companies are formulating their long-term growth strategies, and M&A is certainly a critical part of that," stated Miles, co-head of global M&A at Morgan Stanley. He added that during periods of economic uncertainty and geopolitical turmoil, M&A has consistently proven to be a core strategy for long-term benefit. Management teams and boards of directors are continuing to advance their M&A plans even while facing an uncertain environment.
The rapid proliferation of AI across the economy is a key factor shaping the M&A landscape. "The AI space is a tale of two cities," Miles commented. "Some industries and companies are experiencing unprecedented demand growth, and M&A must be a part of that." He cited the massive data center infrastructure required for AI training and inference as an area where acquisitions are necessary for expansion.
Conversely, AI is disrupting certain business models, particularly in the software sector, where valuations have undergone a significant reset. The recent launch of highly efficient AI agent products by leaders like Anthropic and OpenAI, which could replace certain functional software services at a much lower cost, has triggered heavy selling in global software stocks. The iShares Expanded Tech-Software Sector ETF (IGV.US) has fallen approximately 40% from its September peak, plunging into deep bear market territory. Since February, a pessimistic "AI disruption" narrative has taken hold, with investors concerned that viral AI workflows could undermine the entire SaaS subscription revenue model, leading to rare sell-offs that have spread to sectors like wealth management, real estate, and logistics.
Miles also identified the energy market as a key risk. "For instance, if the Brent crude price remains elevated for a prolonged period, it will inevitably impact company valuations and cost structures," he said. However, he noted that boards are actively assessing whether the effects of high oil prices are temporary or persistent. Management understands that if high prices and new inflationary pressures prove transient, the long-term value of completed deals will ultimately be realized.
Cross-border M&A interest is also heating up as companies seek stronger growth and adjust their supply chains, making deals focused on enhancing business resilience particularly attractive to large international buyers. Miles mentioned that a significant portion of Morgan Stanley's M&A business is driven by long-standing clients who regularly seek the firm's "trusted long-term advice."
According to LSEG data, global M&A deal value hit a record $1.2 trillion in the first quarter. Although the number of deals fell 17% year-on-year, the actual size of the companies being bought and sold was larger, leading to a 26% increase in total value. Four of the six largest deals involved companies leading in artificial intelligence.
Bankers and analysts note that, in contrast to the stagnation following the trade war triggered last April, the escalating Middle East conflict since late February has not significantly dampened M&A enthusiasm thus far.
"This time, people aren't waiting for conditions to improve; they recognize that volatility is part of life and are operating within that framework," said Sam Kim, global head of M&A at Deutsche Bank. "The conversations never stop; companies are finding ways to get deals done in this environment instead of waiting for a return to normal. This is the new normal."
George Holst, global head of corporate coverage, industries, and advisory at BNP Paribas, stated that corporate clients still view M&A as a vital driver of their growth plans. He emphasized that the bank's pipeline of large M&A deals has increased by over 20% in both number and value compared to last year. "We are seeing a notable rise in cross-border transactions as companies pursue growth while also needing a local presence, not just as suppliers but to establish a real economic footprint," Holst said.
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