Global M&A Activity Plunges 41% in Third Quarter as Soaring Bond Yields Dent Dealmaking

Global dealmaking activity experienced a significant slowdown in the third quarter, with the total value of mergers and acquisitions dropping 41% from the prior quarter to $993 billion. This marks the first time quarterly M&A volume has fallen below the $1 trillion threshold since the second quarter of 2025, according to data from LSEG.

A Sharp Reversal

The third-quarter downturn represents a stark reversal from the robust activity seen earlier in the year. While year-to-date M&A volume remains strong at $3.9 trillion, a 28% increase from the same period last year, the number of individual deals has declined by 8%.

The slowdown was particularly evident in large-scale transactions. Only 10 deals valued at over $10 billion were announced in the quarter, the lowest number of so-called megadeals since the fourth quarter of 2024. Notable transactions included Banca Monte dei Paschi’s $32 billion bid for Banco BPM and Gold Fields' $25.7 billion offer for Northern Star Resources.

Rising Rates and Market Uncertainty

The primary driver behind the cooling M&A market is the sharp increase in borrowing costs. The benchmark 10-year US Treasury yield surged to 5.34%, its highest level since 2002, making it more expensive for companies to finance large acquisitions.

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"At the margins [higher yields] makes valuations sometimes a little tougher," said John Collins, global head of M&A at Morgan Stanley, though he added he was "not ready to call a slowdown based on what we are seeing." Other bankers noted that while caution is growing, underlying strategic drivers remain. "Boards feel a greater urgency to pull the trigger on strategic deals,” said Carsten Woehrn, Goldman Sachs’ co-head of M&A in EMEA, pointing to strong secular trends like the boom in artificial intelligence.

Regional and Sector Trends

While dealmaking in the U.S. and Europe fell sharply, the Asia-Pacific region proved resilient, with M&A activity totaling $242 billion, an 8% increase from the second quarter. Cross-border dealmaking also remains a strong theme, up 32% year-to-date, with JPMorgan's global head of M&A, Charlie Bouckaert, noting appetite from U.S. firms to acquire in Europe and vice-versa.

The technology sector, fueled by historic investment in AI and a strong IPO market, continues to be a bright spot. However, some bankers are sounding a note of caution. Andreas Bernstorff, global head of equity capital markets at BNP Paribas, observed that rising rates and political risk are "prompting caution," leading to delays for some initial public offerings.