Global M&A deal rush fades in third quarter as rising borrowing costs bite

By Anousha Sakoui and Echo Wang

LONDON/NEW YORK, Oct 1 (Reuters) - M&A activity in the last three months totalled $993 billion, down 41% compared to the second quarter of 2026, marking the first quarter to fall below $1 trillion since the second quarter of 2025, according to LSEG data.

Banca Monte dei Paschi's $32 billion bid for Banco BPM and Gold Fields $25.7 billion bid for Northern Star Resources were among the 10 deals over $10 billion announced in the third quarter, the lowest number of quarterly megadeals since the fourth quarter of 2024.

While the boom in artificial intelligence and data centre building has lifted the outlook for economic growth, surging energy costs have been fanning inflation and pushing expectations higher about where interest rates will settle.

The ​benchmark 10-year US Treasury yield hit 5.34% on Thursday, its highest level since 2002, after posting the biggest quarterly rise this century in the three months to September.

"At the margins [higher yields] makes valuations sometimes a little tougher," said John Collins, global head of M&A at Morgan Stanley. "That said, the impact is hard to quantify, so I'm not ready to call a slowdown based on what we are seeing."

So far this year worldwide M&A is up 28% to $3.9 trillion, the highest level in the period since 2001, while the number of deals fell 8%, levels not seen since 2020.

“Corporates are still looking for scale or access to markets and technologies they are not in," said Carsten Woehrn, Goldman Sachs' co-head of M&A in Europe, Middle East and Africa.

He sees total deal value exceeding the 2021 peak if the pace continues.

"Megadeals are continuing and we’ve seen significant activity since the summer," Woehrn said. "Boards feel a greater urgency to pull the trigger on strategic deals.”

Historic levels of investment in the technology sector have bolstered deals, with strategic stake purchases in those companies accounting for about one quarter of global M&A so far this year. Earlier this year, both Claude maker Anthropic and ChatGPT maker OpenAI raised tens of billions of US dollars from investors.

While US and European dealmaking fell sharply in the last three months, Asia Pacific M&A totalled $242 billion, up 8% from the second quarter and up 36% from the same period last year.

This has been the strongest year to date for global private equity-backed dealmaking by value since records began in 1980, but the third quarter also saw a slowdown versus the same period last year.

Cross-border dealmaking remains a strong theme this year to date, up 32% on the same period last year. "We're seeing a fair amount of appetite from US companies thinking about acquisitions in Europe for the first time, taking advantage of a strong dollar. In reverse, you're seeing people considering investment in the U.S. to take advantage of the potentially higher growth opportunity in the country," said Charlie Bouckaert, JPMorgan’s global head of M&A.

TRILLION DOLLAR IPOs AND DEALMAKING

New listings, particularly in the technology sector, have fuelled M&A giving the companies new currency to buy up rivals. SpaceX acquired AI coding startup Cursor just days after its blockbuster Nasdaq debut, which saw its valuation surge to more than $2 trillion.

"One of the drivers of activity is that being larger may help companies navigate transition in AI better," Collins said.

The June IPO of Elon Musk's SpaceX helped drive $215 billion worth of initial public offerings, excluding SPACs, priced globally in the year to date, the highest level since 2021, from a lower number of deals than in the same period last year.

In the last three months, stock sales raised US$284 billion, 26% less than the proceeds raised across equity capital markets during the second quarter, though marking a 39% increase from third quarter of 2025, thanks to offerings from SK Hynix and Intel.

Some bankers did sound a note of caution however that some investors were taking more of a pause when approaching some technology and AI-related deals.

"Until about 10 days ago, no one seemed to worry about the midterms, but with rising diesel prices and rates and a risk of a change in political direction, it is prompting caution, ” said Andreas Bernstorff, global head of equity capital markets at BNP Paribas.

In recent weeks some IPOs have been delayed as higher interest rates and setbacks in the data center ecosystem threaten to derail a slew of new issues from the sector. Even with the uncertainty ahead, bankers remain confident. “Strong secular trends (such as AI) are driving activity, and we expect 2027 to be another robust year,” Bouckaert said.

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(Reporting by Anousha Sakoui in London and Echo Wang in New York. Editing by Elisa Martinuzzi and Aurora Ellis)