M&A Momentum: 2025's Pent-up Pipeline

Deals are back—or so pundits expect, with a more business-friendly Republican administration in the US. M&A volumes had slowed after a robust first half this year as company boards awaited the election results. Now, with a potentially less stringent antitrust environment shaping up, we anticipate a surge in pent-up deal activity from the first quarter 2025, assuming economic growth holds.

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Loosening of antitrust policy

An unusually high number of acquisitions were challenged this year, including high-profile cases like iRobot/Amazon and Spirit/JetBlue, as the Biden administration pursued its very restrictive antitrust policy. Many more prospective mergers never made it out of the boardroom due to anticipated regulatory hurdles.

All eyes are now on Trump's nominations for key officials, such as the Federal Trade Commission (FTC) chair. Last week’s nomination of Gail Slater to lead the Department of Justice's (DoJ) antitrust division suggests a more centrist approach.

That said, we don’t expect traditional horizontal mergers—those between companies in the same industry that create dominant market shares—to be just waved through.

But other deals may have an easier and faster path to clearance than before. The Biden administration, especially the FTC under Chair Lina Khan, targeted non-traditional antitrust concerns, including vertical deals (e.g., Activision/Microsoft), conglomerate deals across different industries (e.g., Horizon Therapeutics/Amgen), and acquisitions that threaten nascent competition (e.g., Within/Meta).

Sector opportunities and challenges

We expect healthcare, technology, and energy to be M&A hotspots. These sectors have long had a substantial appetite for consolidation but have seen many deals held back for fears of regulatory pushback.

Healthcare M&A, previously focused on small biotech acquisitions, is likely to expand to include more mature targets. Energy companies, particularly in exploration and production, will likely pursue further consolidation.

Mega-cap technology remains one area of political controversy even under a Trump administration given the ideological conflicts. Announcing Slater’s appointment last week, Trump said Big Tech had “run wild for years, stifling competition.”   

However, even if we take the giant tech platforms (e.g. Alphabet, Amazon, Microsoft, and Meta Platforms) out of the picture, the tech sector overall still has numerous eager acquirers who stand outside the regulatory crosshairs of a Republican DoJ or FTC.

Balancing risk and reward

While the overall mood is certainly optimistic, there are potential pitfalls. Most importantly, successful deal-making cycles depend on a stable economic environment. The current easing of monetary policy and minimal recession fears offer a positive backdrop, but the expected surge in M&A activity may not materialise if economic conditions become significantly more volatile.

Also, during the first Trump administration, several high-profile merger challenges emerged, such as the DoJ’s opposition to AT&T's acquisition of Time Warner. The Federal Communications Commission blocked Nexstar’s acquisition of Sinclair, and the NXP-Qualcomm deal was terminated after China withheld regulatory approval amidst escalating trade tensions with the US.

These cases highlight the need to navigate a complex mix of risks, including personality politics as well as geopolitical considerations. Trump’s aggressive stance on tariffs may heighten risks for deals that require Chinese regulatory approval. This is particularly relevant for deals involving cutting-edge semiconductor technology or critical natural resources.

Even in a less stringent antitrust regime, dealmakers and CEOs are likely to pursue bolder deals that push the boundaries of what is permissible under the new administration.

However, these risks can also present an attractive opportunity set, as they will mean healthily wide merger arbitrage spreads compared to an environment where almost all deals are expected to close with high certainty.

Climate Bonds in 2025 – From US ‘Green Hushing’ to China’s ‘Green Boasting’

With the impact of climate change becoming clearer to us and central banks around the world cutting rates, we expect another strong year for green bonds¹ in 2025. Last year nearly matched the 2021 record for new issuance (Figure 2), followed by $385 billion in the first half of 2024, according to Climate Bonds Initiative data.

Going forward, investors will need to navigate vastly different approaches from the key issuers Europe, China and the United States to environmental policies and market strategies.

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China's green boasting

Since 2014, China has become the largest green bond market, with $616 billion equivalent outstanding by the end of 2023, even though for now most issuance is still domestic.

While there is still scepticism about the ‘greenness’ of domestic Chinese bonds, their alignment with international green standards is increasing, enhancing their credibility.

The country still faces challenges to meet its 2060 net-zero target, but it is progressing rapidly. The addition of 1,200 gigawatt (GW) in wind and solar capacity— bigger than Europe's entire energy market—demonstrates China's determination to pursue its climate goals. Much of its green drive will be funded by green bonds and the country rose to second place globally in green bond issuance in the third quarter of this year, up from fifth in the previous quarter, data from the Climate Bond Initiative shows.

US green hushing

In contrast, the United States presents a much more complex scenario. We anticipate federal climate disclosure rules to be reversed, and a potential withdrawal from the Paris Climate Accords under a Trump presidency. That said, nearly half of all US states are still pursuing net-zero goals and many large US corporations maintain their climate commitments.

However, ‘green hushing’ is a growing trend, with companies cautious about publicising their green initiatives. A notable example is a renowned green bond issuer, a European utility, that recently issued a straight US dollar bond in the US market, avoiding a green label to appeal to a broader range of investors.

Even as the Environmental Protection Agency (EPA) is likely to dilute environmental regulations, we expect the transition from coal to renewable energy to continue. US utilities have one of the oldest coal fleets and many of these will be replaced with either natural gas or renewables, especially solar, given the increasing price competitiveness. These replacement projects are likely to be financed with some green bonds

Europe's steadfast commitment

Europe remains a cornerstone of green bond issuance, accounting for half of the global market. The EU's commitment to sustainable finance was bolstered by last year’s introduction of the EU Green Bond Standard (EUGBS). Although mandatory implementation has been postponed due to regulatory concerns, Europe continues to advance its Sustainable Finance Disclosure Regulation and Taxonomy regulation.

By 2026, the European Securities and Markets Authority will require external reviews for all green bond issuances, underscoring Europe's leadership in sustainable finance and its dedication to rigorous environmental standards.

For investors that means while the green bond market set for growth, it is increasingly shaped by distinct regional strategies. As China and Europe assert their commitment, investors in the US will need to navigate a balancing act between official rhetoric and the practicalities and evidence on the ground.

All data Bloomberg unless otherwise stated.

With contributions from Michael Zhu, Portfolio Manager on the discretionary equities team and Christina Bastin, a Credit Portfolio Manager at Man Group.

1. Green bonds are specifically earmarked to fund projects with positive environmental impacts, such as renewable energy, energy efficiency, clean transportation, and sustainable water management. They are a key component of the broader GSS (Green, Social, and Sustainability) bond category, which encompasses bonds designed to finance projects that deliver environmental or social benefits or a combination of both.