Behind the deals: The changing shape of global M&A

Q3 was a mega-deal pause, not a retreat. Rates drew the line, and Q4 will show who crosses it.  

Global M&A has reached $3.9 trillion this year, up 28% and the strongest start since 2021. Excluding strategic stake purchases, which reflect historic investment in technology, it is $2.9 trillion, up 20% and still a five-year high. But Q3 told a different story. Activity totalled $993.4 billion, down 41% on Q2 and the first quarter below $1 trillion since Q2 2025.

I recently explored these trends in the latest episode of LSEG’s Behind the Deals video series with Elizabeth Kuhr, LSEG Head of News, and Anousha Sakoui, Reuters’ European M&A Editor. Here is my view of what happened and what I’m watching next.

The shape of the slowdown offers some clues as to what is driving it.

Q2 saw 26 deals worth more than $10 billion. Q3 saw ten, the fewest since Q4 2024. Transactions of that size require clarity on financing and confidence from boards. Both are harder to secure when the direction of interest rates is unclear and geopolitical risk is rising. The largest deals are therefore the first to be put on hold.

Seasonality and a very strong first half explain part of it, as Anousha noted. They do not explain a 62% fall in mega-deal count.

The fee data show the same pattern. Q3 investment banking fees totalled $35.2 billion, down 19% from Q2, the strongest quarter since LSEG’s records began in 2000. Year-to-date fees remain strong at $117.0 billion, up 12% and less than 1% below the 2021 record. Completed M&A, debt underwriting and syndicated lending fees are all at record year-to-date levels.

• Regions: US target M&A fell 57% in Q3 and Europe fell 36%, while Asia Pacific rose 8% on Q2 and 34% on a year earlier.
• Sectors: Technology fell 57%, industrials 57% and energy 50%. That is a market-wide pause, not a problem in one sector.
• Year to date: growth is broad-based. US M&A is at an all-time high of $2.0 trillion, up 38%. Europe is at a five-year high of $882 billion, up 54%. Asia Pacific is at a five-year high of $613 billion.

The market is also changing shape. Deal count is down 8% to its lowest level since 2020, yet there have been 122 deals worth more than $5 billion, the most since 2021. Fewer, larger transactions have driven activity this year, but those larger deals paused in Q3.

Cross-border M&A has reached $1.3 trillion, up 31% to its highest level since 2021, although Q3 activity was down 19% on Q2. These flows highlight differences between markets.

• US buyers account for about a third of cross-border activity, aimed overwhelmingly at Europe and the UK, where valuations are discounted.
• Europe is consolidating. Half of its cross-border activity remains within the region. Deals such as KONE’s $34 billion bid for TK Elevator and ENGIE’s $21 billion deal for UK Power Networks fit that pattern.
• Japan shows how rapidly changing rates can affect capital allocation. The yen reached 164 against the US dollar in July. The Bank of Japan has raised rates six times over the past two and a half years to 1.25%, while the ten-year Japanese government bond (JGB) yields 3.04%, a level not seen since 1996. Japan-targeted M&A is down 40% to $113 billion, yet fees from Japan are at a record $4.7 billion, up 23%. Corporate bond issuance has reached roughly $240 billion, including SoftBank’s recent multi-billion-dollar offering. These figures point to a shift towards debt issuance rather than deals.

1. Whether mega-deals return. The fall from 26 in Q2 to ten in Q3 is the clearest indicator of whether this is a pause or a longer-term trend. A record year for investment banking fees would require about $43 billion in Q4, matching the record set in Q2.
2. Whether the US rebounds. After a 57% fall, a recovery in US M&A will be important to the global outlook.
3. The AI listing window. Potential initial public offerings (IPOs) from Anthropic and OpenAI would test the depth of US equity markets. Equity fees are up 37% this year, but Q3 was the weakest quarter since Q2 2025.
4. Private equity. Sponsor-backed M&A is at a record $891 billion, up 35%, but Q3 activity fell 20% on Q2. More stable rates should support renewed capital deployment.
5. European and UK consolidation. Appetite for deals is clear. Whether those transactions complete will be the test.
6. Japan’s debt market. Capital flows are shifting while the policy outlook remains unsettled.

My view is that this market is repricing, not retreating. Year-to-date activity remains strong across markets, but larger deals have been an important driver, and those transactions slowed in Q3. Q4 will show whether they return.

Data: LSEG Deals Intelligence and LSEG Global IB Fees, 1 January–30 September 2026. Figures are updated to 30 September and may differ from those quoted in the video. Strategic stake purchases are included in headline M&A totals unless stated.