Morgan Stanley Sees M&A Wave Coming
Morgan Stanley is predicting a new wave of M&A activity, driven primarily by the industrials and banking sectors. The bank cites stabilizing interest rates and significant pent-up balance sheet capacity as the key catalysts for upcoming consolidation and strategic deals.
The forecast for a surge in M&A extends beyond just Morgan Stanley, with analysts at Goldman Sachs also predicting a strong 2026 for dealmaking and capital markets, citing a constructive economic and regulatory environment. This optimism follows a significant rebound in 2025, where global M&A deal values rose by over 40% to reach $4.7 trillion, the second-highest year on record. Within the industrials sector, a key driver for consolidation is the push for supply chain resilience, automation, and the adoption of AI. Companies are actively seeking acquisitions that enhance their technological capabilities and create more efficient, regionalized operations. This strategic shift is a response to labor shortages, geopolitical pressures, and persistent supply chain risks that have emerged in recent years. In the banking sector, the primary motivations for M&A are the need to scale technology investments and achieve greater market share to remain competitive. Financial institutions are acquiring fintech startups to enhance their capabilities in areas like AI and blockchain, while also consolidating to improve efficiency amid margin pressures. The regulatory environment is also viewed as increasingly supportive of such consolidation. Private equity is poised to be a major catalyst across sectors, with firms sitting on an estimated $4.3 trillion in "dry powder" (capital waiting to be invested). This significant capital, coupled with pressure from limited partners to monetize long-held assets, creates a dual incentive for both buying and selling. PE firms are expected to focus on buy-and-build strategies, particularly in fragmented markets. A notable trend shaping the M&A landscape is the increasing prevalence of corporate separations or "breakups." In 2025, the volume of these transactions hit a record high as large companies streamlined their portfolios to shed non-core assets and focus on their primary business. This trend is expected to continue, creating a pipeline of assets for both strategic and financial buyers. The role of artificial intelligence is becoming a central theme in M&A strategy, acting as both a driver for deals and a tool for execution. Companies are increasingly acquiring firms with strong AI capabilities to gain a competitive advantage, and about one-third of the largest corporate deals in 2025 cited AI as a strategic rationale. Internally, dealmakers are using AI to accelerate target screening and enhance due diligence processes.
