Dealmakers hit the brakes: global M&A sinks 41% in Q3 as borrowing costs bite

Global dealmaking slumped 41% in the third quarter to $993 billion -- the first sub-$1 trillion quarter since the second quarter of 2025 -- as a historic bond rout made big acquisitions harder to finance. Bankers insist the year can still top 2021's record.

The quarter the music slowed

The global deal machine downshifted hard in the third quarter. M&A activity totaled $993 billion over the last three months, down 41% from the second quarter and the first quarter to come in below $1 trillion since the second quarter of 2025, according to LSEG data reported by Reuters on Thursday.

The megadeal count told the same story. Just 10 transactions worth more than $10 billion were announced in the quarter, the fewest since the fourth quarter of 2024. The two biggest names in that small club: Banca Monte dei Paschi's $32 billion run at Banco BPM, and Gold Fields' $25.7 billion bid for Northern Star Resources.

Bankers point to the cost of money. Surging energy costs have fanned inflation and lifted expectations for where interest rates will settle. The benchmark 10-year Treasury yield touched 5.34% on Thursday, its highest since 2002, capping the biggest quarterly rise this century -- the bond rout TickerGrove has been tracking all week.

Not a bust, bankers insist

"At the margins [higher yields] makes valuations sometimes a little tougher," said John Collins, Morgan Stanley's global head of M&A. "That said, the impact is hard to quantify, so I'm not ready to call a slowdown based on what we are seeing."

His peers are similarly unbowed. "Corporates are still looking for scale or access to markets and technologies they are not in," said Carsten Woehrn, Goldman's co-head of M&A for Europe, the Middle East and Africa. Woehrn added that "megadeals are continuing" with "significant activity since the summer" and that "boards feel a greater urgency to pull the trigger on strategic deals." He sees full-year deal value topping the 2021 peak if the current pace holds.

"Strong secular trends (such as AI) are driving activity, and we expect 2027 to be another robust year," said Charlie Bouckaert, JPMorgan's global head of M&A, pointing to cross-border dealmaking -- up 32% on last year -- as US buyers use a strong dollar to shop in Europe.

The year of the giants

For the year as a whole, though, the picture flips. Some $3.9 trillion of deals have been announced, up 28% on last year and the busiest start to any year since 2001 -- spread across 8% fewer transactions than a year ago, the thinnest deal count since 2020. Fewer deals, bigger checks.

Technology is doing much of the heavy lifting. Strategic stake purchases in tech companies account for about one quarter of global M&A this year; earlier in 2026, both Anthropic and OpenAI raised tens of billions of dollars from investors. SpaceX even bought AI coding startup Cursor days after its Nasdaq debut valued the company at more than $2 trillion.

Private equity is on a record pace as well: the strongest start to any year for PE-backed deal value in records stretching back to 1980, though the third quarter cooled versus the same period last year.

Asia diverges

The slowdown was not evenly spread. Dealmaking in the US and Europe fell sharply over the last three months, but Asia Pacific was the exception: $242 billion of M&A, up 8% on the second quarter and 36% higher than a year ago.

The caution flags

Equity capital markets felt the same chill. Stock sales raised $284 billion in the last three months, 26% less than the second quarter's proceeds, though still 39% more than the third quarter of 2025 thanks to offerings from SK Hynix and Intel.

"Until about 10 days ago, no one seemed to worry about the midterms, but with rising diesel prices and rates and a risk of a change in political direction, it is prompting caution," said Andreas Bernstorff, BNP Paribas' global head of equity capital markets. In recent weeks some IPOs have been delayed as higher rates and wobbles in the data-center buildout threaten new issues.

What comes next hinges on whether the fourth quarter re-accelerates. Bankers are betting the AI boom and boardroom urgency keep the pipeline full; the bond market, at 5.34% and climbing, is voting the other way. Friday's jobs report and the Fed's October meeting will help decide which side is right.