Corporate Finance Advisory

2025 Corporate Compass: Navigating global shifts and opportunities

Key themes of this year's Corporate Compass report are the impacts of global elections, observations on current valuations and market conditions, and the potential impact of and the potential impact on M&A in 2025.

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• Title: Key themes from 2025 Corporate Compass report
  • Impact of global elections
  • Capital markets valuations
  • M&A market expectations

We've seen political shifts across the world and most notably here in the US. Themes like deregulation, tariffs, inflation, higher interest rates all will have implications for corporate decision making in 2025.

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• Deregulation
• Tariffs
• Inflation
• Higher interest rates

American exceptionalism: Leading the charge

A recurring theme in our corporate compass document this year is American exceptionalism. And from everything from equity capital markets to investment trends, the US really stands out as an area that has premium valuations for growth across markets around the world.

And we've also seen massive amounts of investment taking place. Connected with that AI trend that really make the US stand out amongst global peers.

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• Title: American Exceptionalism is leading the charge
  • U.S. GDP growth revised upward
  • S&P 500 trades at ~25% premium to Europe
  • $1T Mag 7 investment fuels growth

Source: FactSet; S&P 500, STOXX 600 and FTSE 100 constituents excluding Financials and Real Estate as of as of 12/31/2024. Stanford University Artificial Intelligence Index Report 2024.

2025 M&A trends: A year of opportunity

We expect M&A growth to be substantial in 2025, driven by a number of underlying trends.

On the valuation side, we see small and mid-cap companies outperforming through the back half of 2024, which may open up an opportunity for many private equity owned firms, many who fall into that smaller size category to find their way into other hands, either in the context of acquisitions by other strategic buyers or through public market IPOs. Much of this is being driven by the expectation of deregulation.

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• Title: 2025 M&A trends signal a year of opportunity
  • 8-23% Increase in M&A Activity Expected
  • Small Caps Outperformed Large Caps by ~30% in 2H 2024

Source: Factset as of 12/31/2024; FRED, Dealogic.

Consumer risk: Volatility on the rise

The increasing risk at the consumer level that has everything to do with increasing ownership of stocks, more volatile as a result, the gamification of things like betting markets and even just more traditional trends like the increase in, credit card debt are all factors that we see increase the underlying risk of the US consumer, and they may ultimately have negative downside consequences, especially if we go into a recessionary environment in the longer term.

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• Title: The U.S. consumer is taking more risk
  • Record High Credit Card Debt: $1.17T in Q3 2024
  • 58% of American Families Own Stock

Source: 2022 Survey of Consumer Finances (Federal Reserve).

Geopolitical challenges: Navigating uncertainty

Companies will face a number of risks in 2025 as well. That includes geo geopolitical risks and the long term implications of ongoing conflicts around the world, as well as the potential for capital market volatility as investors try to digest the implications of new administration policy.

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• Title:  Geopolitical challenges require navigating uncertainty
  • Highest Number of Active Conflicts Since WWII
  • Volatility in capital markets

Source: UCDP/PRIO Armed Conflict dataset.

Strategic preparedness: Seizing opportunities

Companies can prepare for the risks and opportunities of 2025 in a number of different ways. That may range from being proactive in capital raising activities, being aggressive or opportunistic in terms of acquisitions or M&A opportunities, and ultimately maintaining financial flexibility to be prepared for whatever comes at you in 2025.

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• Title: Strategic preparedness is key to seizing opportunities
  • Proactive Capital Raising and M&A Strategies 
  • Maintain Financial Flexibility