Morgan Stanley Research predicts a slowdown in M&A activity in early 2025 due to market volatility.
Morgan Stanley Research predicts a slowdown in investment banking during the first half of 2025 as market volatility creates uncertainty for CEOs, boards, and sponsors planning deals.
Analysts expect capital markets activity to remain subdued until the third quarter of 2025, when they anticipate a more meaningful recovery. According to the research note, recent market pullbacks, heightened volatility, and economic uncertainty have dampened the strong conditions seen earlier in the year.
Despite a recent uptick in investment banking activity—bolstered by Wall Street’s optimism over the business-friendly stance of President Donald Trump's administration—M&A activity in the U.S. has slowed significantly. As of late February 2025, only 1,603 deals had been signed, marking the slowest pace since 2009, according to Dealogic data.
The note also warns of potential downside risks, estimating a 24%-47% decline for Midcap Advisors and a 9%-27% drop for Money Center Banks in a worst-case scenario.
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