Morgan Stanley forecasts global M&A activity will hit $6.4 trillion in 2026, a level that would outstrip the surge seen in 2021. The investment bank attributes the expected rise to firmer equity markets and a return of corporate confidence that together have triggered a fresh wave of transactions.
After a period during which high interest rates and volatile markets had kept executives reluctant to pursue major deals, Morgan Stanley says dealmaking shows signs of a broad-based revival. The firm noted that despite headwinds earlier this year - including tensions in the Middle East and anxieties over disruption from artificial intelligence - Wall Street sentiment has largely moved past those concerns.
According to Morgan Stanley, activity gathered pace in the second quarter. Announced transactions jumped by more than 64% year-on-year, led by sectors including software, utilities, energy and healthcare. The firm also reported that deal completions increased by over 33% in the same period.
Regulatory dynamics played a role in the improving outlook. Morgan Stanley pointed to indications that the Trump administration has adopted a lighter-touch approach toward large transactions, reducing the degree to which aggressive antitrust enforcement is expected to derail deals. "In line with our expectations ahead of the 2024 election, the Trump administration has pursued a lighter-touch regulatory regime, albeit with important nuances under the surface," the bank's analysts wrote. "That means the M&A backdrop has become more constructive."
The bank expects deal opportunities to widen further as geopolitical uncertainty eases, encouraging companies to reorganize assets while private-equity sponsors deploy accumulated capital. Morgan Stanley estimates alternative asset managers currently hold roughly $4.3 trillion in capital available for transactions. Reflecting this, sponsor-backed M&A announcements rose by more than 10% in the second quarter.
Still, Morgan Stanley flagged the potential for interest-rate increases as a key risk to its M&A outlook. Higher borrowing costs usually constrain acquisition activity by raising financing expenses and complicating leveraged buyouts. The resilience of the current wave of M&A so far suggests transactions have withstood past rate pressures, but the firm cautioned that future rate moves could alter that calculus.
Investors will be watching second-quarter earnings reports from the largest U.S. banks next week for additional clarity on the dealmaking environment, including indications about debt and equity issuance that underpin many transactions.
Summary
Morgan Stanley predicts a record $6.4 trillion in global M&A by 2026, fueled by stronger equity markets, a more permissive regulatory stance, and significant private-equity capital. Deal announcements and completions rose sharply in Q2, though potential interest-rate hikes remain a key uncertainty.