The big comeback of deals on Wall Street

Just under a year ago, Donald Trump's election raised high hopes amongst investment banks. After several years of high interest rates hampering their business, the Republican's return to the White House was expected to boost activity. While the first few months of his term did not live up to expectations, deals are now back on the table.

At the beginning of the year, M&A activity seemed somewhat frozen. This was due to the uncertainties generated by Donald Trump. In particular, the issue of tariffs was prompting companies to postpone such transactions.

Ultimately, trade agreements were concluded over the summer, partially lifting this uncertainty. Above all, the market has moved on a bit. This is because the US economy remains resilient and investors are betting on artificial intelligence, which is driving indices to new peaks.

Business is booming

And now, the Fed is starting to cut rates again, with its first cut in September and several more expected in the coming quarters by the market. This environment of monetary easing is favorable to investment banking activities.

According to Bloomberg data, transaction volumes over the last three months have reached almost $1.6 trillion. Q3 2025 is thus the most prolific since the Q4 2021.

Number of deals (green) and volumes per quarter. Source: Bloomberg

There were 14 transactions worth over $10bn over the quarter. Examples include Union Pacific's $85bn acquisition of Norfolk Southern and Palo Alto's $25bn acquisition of CyberArk.

With this rebound, 2025 is expected to be the best year since 2021. In the first nine months of the year, investment banks generated $95.4bn, according to LSEG, the second-highest total since data collection began.

A sign of exuberance?

This week has also been marked by a new mega deal. EA Sports has been bought for $55bn by Saudi Arabia's Public Investment Fund (PIF), Affinity Partners—Jared Kushner's fund—and private equity firm Silver Lake. The $55bn deal makes it the largest LBO in history.

Prior to this, the largest transaction was the $45bn acquisition of Texas electricity provider TXU Energy in 2007 by KKR and TPG. Never heard of this company? That's not surprising, since it went bankrupt in 2014.

This is not to say that EA Sports will suffer the same fate. But we can question the current situation. Between record-breaking stock prices, record valuations, and now a possible boom in deals, there is a sense of exuberance in the air. And the Fed's rate cuts are likely to boost the market even further.

A sign of this frenzy is the return of SPACs, shell companies used to raise money to buy a business at a later date. Since the beginning of the year, more than 90 SPACs have raised approximately $20bn, the highest total since 2021, according to SPACInsider data.

SPACs had their moment in the spotlight in 2021, at the peak of central bank accommodation and "free money." It was an excellent year for risky assets. The S&P 500 gained 27% in 2021. But the index then lost 20% in 2022, amid rising Fed rates, which were themselves responding to a return of inflation.