Global M&A falls 41% in third quarter as rates climb

Global mergers and acquisitions totaled $993 billion in the third quarter, down 41% from the second quarter, according to LSEG data cited by Reuters. It was the first quarter under $1 trillion since the second quarter of 2025. Higher borrowing costs, rising energy prices and political uncertainty cooled dealmaking over the summer. Even so, 2026 is still on track to be a record year for deal value.dailysabah+1

Year to date, worldwide M&A volume is up 28% at $3.9 trillion, the highest for the period since 2001. The number of deals, however, fell 8% to levels last seen in 2020. Mergermarket data also shows 2026 on pace for a record year by dollar value. The U.S. slowdown was steeper: deal volume there fell by nearly half, to $535 billion, in the third quarter.finance.yahoo+1

Rates and yields weigh on deals

The benchmark 10-year U.S. Treasury yield reached 5.34% on Thursday, Oct. 1, its highest level since 2002. That followed the largest quarterly rise in the yield this century. The Federal Reserve raised interest rates by 25 basis points in September. Mergermarket head Lucinda Guthrie also pointed to calls for a slowdown in the AI race and to the cost of the U.S. war in Iran, which has pushed up energy and other prices.dailysabah+1

"At the margins (higher yields) makes valuations sometimes a little tougher," said John Collins, global head of M&A at Morgan Stanley. He added that "I'm not ready to call a slowdown based on what we are seeing". UBS ↗ 0.60% analyst Erika Najarian was more cautious, writing that "an unhappy bond market implies a deeper freeze in future activity".finance.yahoo+1

Only 10 deals over $10 billion were announced in the quarter, the fewest since the fourth quarter of 2024. They included Banca Monte dei Paschi's $32 billion bid for Banco BPM and Gold Fields' ↗ 1.34% $25.7 billion bid for Northern Star Resources.dailysabah

Bright spots remain

Not every region slowed. Asia Pacific M&A rose 8% from the second quarter to $242 billion, and was up 36% from a year earlier. Cross-border deals are up 32% so far this year. Carsten Woehrn, Goldman Sachs' The Goldman Sachs Group, Inc. ↗ 0.42% co-head of M&A for Europe, the Middle East and Africa, said total deal value could pass the 2021 peak if the current pace holds.dailysabah

Equity markets show the same strains. Smart ring maker Oura postponed its planned IPO, and Holtec Nuclear and Bamboo Insurance have also pulled back from listings, all citing market conditions. Investors will get more signals later this month, when the biggest banks report earnings. The banks' forecasts for investment banking fees range from a decline at Bank of America ↗ 0.17% to growth in the mid-to-high teens at JPMorgan ↘ 0.33%.finance.yahoo

"We had an extraordinary Q2. Q3 is a normalization rather than an end of a cycle," said Sarah Jones of law firm Clifford Chance.dailysabah