The US IPO market entered 2025 with renewed optimism following a stronger-than-expected close to 2024. As of May 31, traditional IPOs have raised more than $11.0 billion, slightly behind last year’s pace, signaling a continuation of the market’s tentative recovery.

This year’s activity started off stronger, marking the busiest opening stretch since the bubble year of 2021. But momentum stalled late in the first quarter amid macro headwinds, including persistent inflation, mixed signals on AI-driven valuations and the global market sell-off that occurred in April following shifting US trade and regulatory policy under the new administration.

A few IPOs struggled to price in the first quarter. After the early April tariff announcements, many in-process IPOs immediately paused as market volatility spiked. While the real economy seems to remain somewhat resilient, the Federal Reserve has adopted a wait-and-see approach. At its most recent meeting, the Fed held rates steady and reiterated its data-dependent stance.

By April, investor sentiment had grown cautious amid sharply higher volatility and policy uncertainty – highlighting the fragile nature of the current IPO window. That said, newly public companies have performed relatively well, helping sustain interest in the pipeline. SPAC issuance, on the other hand, is enjoying its most active start since 2022, with over $9.5 billion raised, though de-SPAC activity remains muted.

The time period from mid-May to early June brought a notable rebound in equity market sentiment following a 90-day pause in new tariff announcements. The IPO market responded in kind, with six companies coming to the market and all either achieving pricings above (four companies) or at the high end (two companies) of their ranges. All six opened for trading the next day at prices more than 20% above pricing (with two of the IPOs exceeding 100%).

This group included a broad sampling of company types: a financial technology company, a connected TV advertising company, a digital health platform, a crypto infrastructure provider, a defense/space tech company, and a notable consumer focused neobank. The breadth of industry sectors underscores the improving equity risk appetite in the IPO market. The success of these pricings and subsequent openings suggest the IPO window may have finally widened and investors are ready to put capital to work for companies with strong fundamentals, capital discipline and compelling equity narratives.

There could be plenty of more M&A this year, but don’t hold your breath for that game-changing IPO.

Falling interest rates will continue to boost UK equities this year; dealmaking activity will hand shareholders healthy paychecks; and at least one of the UK’s listed laggards will make a big comeback. There could even be another stock market record high on the FTSE 100.

That is the theory, at least.

It is hard to make predictions. At the end of 2023, very few fund house investment previews were discussing the possibility of a second Donald Trump term in the White House, if they even mentioned it at all. It’s a reminder that truths can be uncomfortable—and that the future is uncertain. Nonetheless, patient investors stand to benefit, provided they stay the course. The UK is a good place to start.

Is The UK An Attractive Place to Invest?

So says Morningstar Investment Management’s 2025 Outlook. It argues current valuations in the US look expensive and that better opportunities may lie elsewhere. Investors looking for high-quality bargains would still do well to consider UK housebuilders in their portfolios.

“On an absolute basis, European equities are trading at around a 5% discount based on our bottom-up valuation model. Not cheap, but also not expensive compared with where markets have traded over the past few years,” the report begins.

“The relative picture is even more compelling with Europe—the UK in particular—making it the most attractive developed markets region globally. Add to this the macroeconomic tailwinds of rising gross domestic product, falling inflation, and lower interest rates, and the picture looks even brighter.”

Housebuilders like Barratt Redrow BTRW, Berkeley Group Holdings BKG, and Persimmon PSN are still solid options. Each company’s stock price weathered a difficult year, with Barratt falling 21%, Berkeley losing around 20%, and Persimmon dropping around 14%. But valuations now look attractive, according to Morningstar metrics.

“UK homebuilders have been through the wringer. At one point, they lost two thirds of their value from the 2021 lockdown highs, share prices have rallied over the past year, but we still believe names in this space could rise by as much as 50%,” it says.

“Lower interest rates are leading to more affordable mortgages, and supportive government policy should help pave the way in 2025.”

How Much Will The Bank of England Cut Rates in 2025?

At the end of 2023 many commentators expected rate cuts galore from the BoE in 2024. By the end of this year it will only have cut rates twice: in August, and then in November.

Michael Strobaek, global chief investment officer at Lombard Odier, and Dr Nannette Heckler-Fayd’herbe, the company’s head of investment strategy for sustainability and research, say that, provided UK GDP growth comes in as projected, and inflation continues to moderate, monetary policy will be supportive of rising valuations.

“In the UK, we expect somewhat higher [economic] growth in 2025, and inflation slightly above target, with revised fiscal rules providing more fiscal flexibility,” they say.

“Still a more moderate inflation path should allow the Bank of England to cut rates more extensively than markets expect.”

As political commentators all too keenly pointed out after the Labour government’s first Budget in October, much depends on economic growth. The government is expecting GDP to leap to 2% in 2025 from 1.1% in 2024.

But the government—and the Office for Budget Responsibility specifically—has been wrong before. The absence of accurate UK labor market data—and a further delay announced just last week—won’t do much to assuage skeptics. On Dec. 4 BoE governor Andrew Bailey told the FT that he was expecting four rate cuts in 2024, which is ahead of market expectations.

Will The FTSE 100 Look Different in 2025?

That’s all political. But politics played an important role in 2024, and could do so again next year.

In 2024, a listings regime overhaul changed the way that companies list in the UK. The policy is a legacy from the Rishi Sunak era but will still be completed by the Starmer administration. It is designed to make it easier for companies to list, and for investors to benefit as a result.

Until 2024, companies listed in London required a “premium” listing to qualify for inclusion in a FTSE index. A new category created in July—“Equity Shares Commercial Companies”, or ESCC—now merges the premium and standard listing categories. That opens the door to more companies being included in the top tier of the UK equity market. Companies that previously only had a “standard” listing are now in a “transition” category, and must apply to switch to ESCC.

This change could alter the way the FTSE 100 and 250 look.

Oxford Nanopore ONT and Coca-Cola Europacific Partners CCEP have already made the leap, while THG THG, which floated in 2021 and has endured an abysmal performance since, is aiming to confirm its transfer “no later than March 2025”. It is possible many more will do so this year. If you own passive FTSE tracker funds or exchange-traded funds that mimic movements in the UK markets, they will automatically buy new constituents. It’s worth keeping an eye on this process.

Meanwhile we’ve just had a FTSE reshuffle that saw three stocks promoted to the FTSE 100, in a move that took place just before the Christmas break. So the blue-chip index will look different as 2025 starts.

Which Companies Will IPO In 2025?

And speaking of new constituents, investors are desperate for an exciting initial public offering (IPO) to bring energy back to London’s markets. One fund manager is predicting that the UK “IPO drought” will end in 2025, but you shouldn’t get your hopes up.

Shein, the fast-fashion brand whose supply chain issues have already made it the target of criticism and ethical concerns, will likely list this year. In late November, Financial Conduct Authority chief executive Nikhil Rathi, who is himself a former chief executive of the London Stock Exchange, appeared to give the green light to a company like Shein floating.

Investors might not even have to wait until this year to see a decent IPO. But there’s a catch.

Film and TV production group Canal+, which is demerging from Vivendi VIV, floated on the London Stock Exchange on Dec. 16. Its £6.7 billion valuation means it would normally list on the FTSE 100, but that cannot happen because its IPO prospectus states it will not adhere to the UK’s Takeover Code. That means investors looking for a big FTSE 100 float will have to search elsewhere.

They might be searching for a while. Revolut chief executive Nik Storonsky says a London listing would not be “rational” because of market liquidity and tax on share purchases. It also looks like Klarna, the buy-now-pay-later app whose popularity among young people has raised eyebrows, will reject London for New York.

Will The Laggard UK Stocks Make a Comeback?

And as for the laggards, there have been a fair few in 2024. Burberry BRBY fell out of the FTSE 100 in late August, Aston Martin Lagonda’s AML turnaround plan stalled in late September. Though Kingfisher KGF had a good first three quarters, the B&Q and Screwfix owner isn’t exactly nailing it in Q4, and now has a lower Morningstar fair value estimate as a result.

Ocado Shares Struggled in 2024

Ocado Group Stock vs. Morningstar Fair Value Estimate Source: Morningstar Direct. Data as of Dec. 03, 2024.

Source: Morningstar Direct

And then there’s Ocado OCDO, the technology-enabled online supermarket. Last year it fell out the FTSE 100, and the shares lost nearly 60% to just over £3. That’s a far cry from its pandemic share price high of £28.08 in February 2021. Its valuation is bad news for current investors in the company, but represents a potential buying opportunity for patient newcomers. According to Morningstar analysts, the company is now significantly undervalued.

But comebacks are possible, as the ride experienced by St James’s Place STJ investors testifies. After the UK’s largest wealth manager was forced into line by the FCA last year over its business practices, its stock lost more than half its value, but this year staged a remarkable comeback—thanks to rising assets under management and a cost-cutting plan that impressed investors. SJP’s stock price rose 30% in 2024 and the company joined the FTSE 100 at the end of the year. Nobody had that on their bingo list for 2024.

St James’s Place Share Price Has Bounced

St. James’s Place Stock Price Source: Morningstar Direct. Data as of Dec. 03, 2024.

Source: Morningstar Direct

UK M&A Returned

Mergers and acquisitions activity returned to London in 2024, with Hargreaves Lansdown HL HL. among the notable private equity deals. 2025 could see a repeat, and particularly if struggling stocks like Burberry BRBY and Dr Martens DOCS attract the attention of bargain-hungry consolidator companies.

Aviva AV. got through to Direct Line DLG in the end with an offer accepted from the larger insurance group. Burberry has already been the target of at least one reported bid from Moncler. If valuations remain depressed across the UK’s markets and dividends don’t cut it, that’s only going to encourage investors to look for value in other ways.

All in all, it will certainly be a busy year. Will the FTSE 100 top its May 2024 high of 8,445.80 in 2025? You’ll have to wait to find out.

Surprise, surprise: Winning M&A strategies for turbulent times.

We began 2025 feeling cautiously optimistic about an uptick in M&A over the course of the year but also warned of some wild cards that could spoil the party. Those cards turned out to be a lot wilder than even we had imagined: financial markets have been bouncing up and down like a yo-yo on the daily news flow out of Washington DC, where talk of tariffs has been louder—and action on deregulation has been slower—than expected. Meanwhile, regional conflicts are heating up and long-term interest rates in the US and Europe have defied expectations.

For all the surprises, deals are getting done—and dealmakers are finding ways to navigate through the uncertainties that prevail in today’s M&A market. M&A volumes globally continue to decline: they dropped by 9% in the first half of 2025 compared with the first half of 2024, while deal values are up 15%. We continue to see transactions in companies with a local focus within national borders, as well as in service companies or others less susceptible to tariffs. Great companies with strong cash flow and healthy prospects in any territory or sector are still being bought and sold. However, the market has not been kind to the many companies falling outside these parameters. In the US, for example, a PwC Pulse Survey from May 2025 showed that, in response to the tariff uncertainty, 30% of companies had paused or revisited deals. We expect dealmakers to feel the continued fallout over the coming months.

M&A isn’t going away, though. It’s a fundamental part of corporate culture and the lifeblood of the private equity (PE) world. Indeed, that same PwC Pulse Survey shows that 51% of US companies are still pursuing deals—a clear sign that transformation and business model reinvention remain a top priority. It’s a reflection of the new era we have entered, one in which artificial intelligence (AI) and new competitive dynamics are reshaping the corporate landscape, with AI a catalyst for industry disruption and change. As this new generation of technologies takes hold, it’s likely to spark more deal activity.

In this context, dealmakers across the globe are understandably asking, ‘What’s the best course of action to follow?’

High stakes, hard choices

In today’s M&A market with such complex and sometimes contradictory trends, dealmakers are having to figure out their next move. The new realities they face include the following:

Uncertainty may be the new constant. Over the past five years, the M&A market has been defined by near-constant change. The initial shock of the COVID-19 pandemic brought dealmaking to a standstill, followed by a sharp rebound and record levels of activity. Since then, however, with higher interest rates and shifting geopolitical and regulatory environments, the pendulum has swung back towards caution. Today’s more complex and unpredictable market presents dealmakers with a far less forgiving backdrop. The result is an M&A environment in which elevated levels of uncertainty are not only pervasive but also structural. For dealmakers, progress starts with accepting that uncertainty is likely to be the new permanent state, which means that they will need to find ways to continuously plan and prepare for it rather than waiting for it to pass.

Capital allocation is facing a new set of trade-offs. Capital is no longer freely flowing—and nowhere is that more apparent than in the growing tug-of-war between M&A and AI investment. Big Tech companies, including Microsoft and Meta, have announced plans to collectively spend hundreds of billions of dollars this year alone to build out AI infrastructure, talent and capability development. This is sparking a super cycle of capital spending, which points towards multi-trillion-dollar global investments over the next five years. The tech spending is not just on AI. Rather, we are in a time of rapid technological ferment in all sectors that is forcing CEOs, boards and dealmakers to make tougher decisions about capital allocation. For some, that means fewer or smaller deals. For others, it means using partnerships, minority stakes, or carve-outs to pursue strategic goals while preserving balance sheet strength. Capital discipline today is about making deliberate and measured choices. Organic or inorganic growth? How much to spend on tech? And on AI? It all combines to make capital allocation one of the most important and daunting decisions for executives today.

AI’s innovation potential will bring disruption and M&A opportunities. The rapid advance of new AI technologies has jolted the corporate world into a new phase of high-stakes transformation. For acquirers, this presents both risk and opportunity: the risk of acquiring a business on the brink of disruption and the opportunity to harness new technologies to innovate and gain a competitive edge. The M&A market is increasingly reflecting this divide, with rising demand for capability-driven deals, such as Google’s proposed $32bn acquisition of Wiz, and a reassessment of traditional assets through an AI lens. The next six to 12 months will be critical for leaders to reposition their companies for the next wave of innovation. The investment in digital infrastructure and energy to support the growth in AI has already started, and companies across industries are rapidly developing AI agents to enhance productivity, reduce costs and unlock new revenue opportunities. Yet making the most of this new tech wave is difficult and expensive. Companies working to embed AI in their business and operating models face challenges ranging from execution risk to cultural resistance. Nonetheless, as our latest CEO Survey revealed, the cost of inaction is far greater: 40% of CEOs say their companies won’t survive the next decade if they don’t chart a new path.

The data on global M&A transactions across all sectors in the first half of 2025 reflects this tension between understandable caution in the face of greater uncertainty and, at the same time, urgency about moving forward with transformation plans. If the current pace of dealmaking continues, total deal volume for 2025 may fall below 45,000—the lowest level in more than a decade. At the same time, the rise in deal values signals a trend towards larger transactions: the number of deals greater than $1bn in value is up 19% since the same time last year, while those greater than $5bn in value are up 16%. The technology sector continues to see the most M&A activity, but deal activity is widespread across sectors. And while overall deal activity remains subdued in most countries, there are exceptions—for instance, India and the Middle East, where deal volumes increased by 18% and 13%, respectively.

Potential deal activity is still percolating. Asked about their status on pursuing new M&A, 51% of respondents in PwC’s May 2025 Pulse Survey say they have initial steps underway (31%) or are beyond initial steps (20%). The administration’s policy shifts are likely short-term obstacles. Over the long haul, they may contribute to existing economic, technological and geopolitical trends pushing businesses toward transformation. The question is exactly how long it will take to reach a policy equilibrium in which C-suite leaders are comfortable deploying capital on major new investments.

During the lull, dealmakers can prepare for a dynamic operating environment as they evaluate their M&A strategy and execution. Running scenario analysis and having value creation roadmaps under the potential scenarios will be of critical importance to driving value through M&A. The critical question facing dealmakers right now is whether they try to wait out the administration’s current policies. The current volatility will create opportunities for strategic and financial buyers who can move quickly and decisively.

Divestiture activity, for instance, is likely to pick up as activist investors often begin circling during uncertain economic times. In 2024, activist activity by hedge funds and investment managers was 16% higher than the 5-year average (2019–2023) and 44% higher than the 10-year average (2014–2023), according to S&P Global Market Intelligence. This suggests a notable uptick in activity. Corporates that actively manage their liquidity may have a chance to land a key asset from a competitor. We’re seeing PEs conducting preliminary due diligence on many corporate divestitures but they remain mostly bearish on valuations.

Companies need to be able to identify sources of uncertainty and the various outcomes they might produce. There’s a significant opportunity for dealmakers who understand the impacts that changes have on elements including costs, margins and pricing power. Scenario planning around sources of uncertainty needs to be conducted more frequently — such as once a month or even more frequently instead of once a quarter or annually. Agile companies know what they want to buy or sell in multiple scenarios and are ready to act.

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How’s the deal-making environment currently?

In the context of MNC exits, is it because of

the advantage enjoyed

by local players?

What makes you confident this will be a strong year for IPOs… as some issues listed below offer price in the previous year?

Most examples you’ve cited of equity transactions are offer-for-sale. Is that a concern?

If India’s economy is doing so well, why is FDI so low?

Would poor Q1 numbers slow IPO activity?

Some argue valuations are unsustainably high…

As IPO fundraising hits new highs, Citi is leading the charge. The top M&A and equity banker last year, Citi aims to repeat its performance with a 2-percentage-point market share gain, focusing on impactful deals over smaller sub-Rs 500-crore IPOs. In an interview with TOI, investment banking head Rahul Saraf discusses the market scenario.Excerpts:The markets are very active and will likely remain so. There’s strong activity both on the M&A and equity sides, and each deal has a reason behind it. It’s not just about rich valuations. Private equity is churning capital – if they get big investments they also need exits. Large conglomerates are carving out businesses for IPOs as they reach a certain scale. On the M&A front, some MNCs are selling out as they reassess relevance and capital allocation in India. Our job is to identify these triggers earlier than most.It’s more about aggression – an Indian entrepreneur’s risk appetite is very different from that of a European boardroom.Global firms often face structural constraints in addressing tier-2 and tier-3 markets. Many foreign firms are realising they’re no longer among the top players, and that initial advantages in capital and technology have diminished. In 6-7 out of 10 such cases, that’s the shift we are seeing.It depends on your investment horizon. Hyundai’s IPO – the largest ever in India – is now trading well above its issue price. The market is more sophisticated today. We’re seeing a robust pipeline with several Rs 8,000-10,000-crore sized IPOs expected over the next 12 months.My estimate is we’ll see $25 billion in IPOs and another $15-20 billion in QIPs and blocks. These are largely driven by private equity exits, MNCs, and large corporate carve-outs. Even if valuations stay flat, these transactions will continue, because they are strategically important and there is no issue in terms of demand for quality companies. The only question is what price.That’s the current trend. The traditional view was that IPOs should raise primary capital for growth. Now, investors are comfortable if the company is already well-capitalised. Private equity exits via OFS are accepted if the company doesn’t need new funds. The key is that high-quality paper is entering the market, deepening it. Some ask, is there a valuation froth? But that is because there is a liquidity trap in India as money cannot go out of the country leading to a lot of domestic liquidity. If India continues to grow as planned, as and when quality paper comes in, those excesses in some pockets will get evened out.Private equity and sovereign wealth funds will continue to invest in India – they’re financial investors, focused on returns and exit multiples. But for strategic investors, it’s different. Their decisions depend on available cash, strategic relevance of investing in India, shareholder expectations, and whether capital can be deployed more efficiently elsewhere.It’s hard to predict the market in the short term. Fundamentals matter over 12-36 months, but markets move minute by minute. If Q1 is soft, there may be some temporary impact. But the long-term trajectory matters more. If the broader economy remains on track, short-term volatility won’t derail IPOs. Liquidity is abundant, and markets look ahead, not behind.A weak quarter might delay an IPO or impact valuation in a specific case, but overall activity should remain strong. Even if markets stay flat for a year, IPOs will continue.Valuations are always relative. From a European lens, India looks expensive. But peers in India may trade at 20x earnings, so 15x here isn’t high. India’s valuations have risen due to consistent flows, growth, and political stability. Today we’re at 21-22x, compared to a 20-year average of 18x – not excessive. In contrast, some global markets have de-rated sharply. India’s higher multiples reflect its stronger outlook.