Strategic Growth and New Capabilities: The Foremost Drivers of M&A in 2025

As we step into 2025, the landscape of mergers and acquisitions (M&A) is evolving rapidly. One of the foremost drivers of this change is the pursuit of strategic growth and new capabilities.

Companies are increasingly leveraging M&A to enhance their competitive edge, expand their market presence, and integrate innovative technologies.

Strategic growth: Expanding horizons

Companies are turning to M&A as a strategic tool to achieve growth objectives. By acquiring or merging with other firms, businesses can:

• Enter new markets — M&A allows companies to quickly penetrate new geographic regions or market segments, bypassing the time and resources required for organic growth.
• Diversify product offerings — Acquiring companies with complementary products or services enables firms to broaden their portfolio and cater to a wider customer base.
• Achieve economies of scale — Larger entities can benefit from cost efficiencies, improved bargaining power, and streamlined operations, leading to enhanced profitability.

New capabilities: Embracing innovation

The rapid pace of technological advancement is compelling companies to seek new capabilities through M&A. Key focus areas include:

• Artificial intelligence (AI) — AI is revolutionizing industries, and companies are acquiring AI-driven firms to integrate advanced analytics, automation, and machine learning into their operations.
• Digital transformation — The need for digital capabilities is driving M&A activity, with companies seeking to enhance their digital infrastructure, cybersecurity, and online presence.
• Sustainability and ESG — Environmental, social, and governance (ESG) considerations are becoming crucial. Companies are acquiring firms with strong ESG practices to align with regulatory requirements and consumer expectations.

Private equity's role

Private equity (PE) firms are playing a significant role in driving M&A activity. With substantial dry powder (uninvested capital), PE firms are actively seeking opportunities to invest in companies offering strategic growth and new capabilities. Their involvement brings not only capital but also experience in scaling businesses and improving operations.

Regulatory and economic factors

The normalization of regulatory and monetary policies is providing a conducive environment for M&A. With reduced regulatory uncertainty and favorable economic conditions, companies are more confident in pursuing large-scale transactions. This newfound clarity is encouraging businesses to engage in ambitious M&A activities to drive growth and transformation.

How CLA can help with strategic growth through M&A

In 2025, CLA is looking forward to help in the pursuit of strategic growth and new capabilities in M&A activity. Companies are leveraging M&A to expand their horizons, embrace innovation, and stay competitive in a rapidly changing landscape. As businesses continue to navigate this dynamic environment, M&A will remain a critical tool for achieving long-term success.