Waiting for the turn: M&A's crossroads in a market on pause

10 June 2025

As 2025 unfolds, R3 recently convened the Special Situations M&A faculty’s latest roundtable - reading less like a typical industry update and more like a weather report before a storm — or perhaps, the uneasy calm in its wake.

The main takeaway? M&A isn’t broken. It’s bracing itself.

Across the room — from banks to boutique advisors — a striking consensus emerged: mainstream M&A is in hibernation. Volume has slowed, and the road to recovery looks longer than a spring rebound. But while the traditional pipeline stutters, another path gains momentum — Special Situations.

Opportunity in the ashes?

Uncertainty, paradoxically, has opened doors. Distressed and special situations M&A is on the rise. Notably, it’s not just the volume that’s up — the quality of deal flow has improved. “Improved quality” is a phrase worth underlining: this isn’t the fire sale era of 2020. Buyers and investors are seeing opportunities they haven’t encountered in years.

Still, even these opportunities come with caveats. Stakeholders are in holding patterns, hesitating to act, hoping underperforming assets recover before hard choices are made. Credit funds and private equity firms — under pressure to exit ageing COVID-era assets — are choosing inertia over action, pausing disposals to avoid crystallising losses. 

The hidden costs of waiting

But kicking the can down the road isn’t free. Delays in diligence, buyer-seller expectation gaps, and extended timelines are creating deal fatigue. Failed auctions, paused processes, and inflated valuations — are distorting the market. Buyers aren’t walking away; they’re just walking more slowly, and cautiously.

With many businesses in limbo, the importance of strong, realistic advisory has never been greater. The sentiment was clear: now is not the time for sugar-coated optimism — it’s time for hard truths and better planning.

Sector struggles, and glimmers of motion

Certain sectors are flashing warning lights. Consumer-facing industries — retail, leisure, hospitality — are wrestling with falling demand and rising costs. Construction, too, is wading through inflationary quicksand.

And yet, amidst the stagnation, some sectors are stirring. EV infrastructure, education, tech, and even water are seeing increasing activity. There’s institutional appetite, albeit tempered by caution around readiness and affordability — especially in EVs.

A system under strain

Beneath the transactional layers, structural pressures are mounting. CVAs and restructuring plans work — but they're expensive. Legislative reform to streamline insolvency tools is needed, but faith in government action is low. Meanwhile, HMRC’s ramped-up collections efforts signal more pressure coming for SMEs — perhaps the next wave of restructuring targets.

The road ahead

The roundtable didn’t offer easy answers. But it did offer clarity:

• Liquidity pressure is real and rising.
• Unrealistic pricing is stalling movement.
• The mainstream M&A market may remain subdued until late 2026.
• The mid-market — particularly SMEs — is likely the next restructuring frontier.

The message? Be ready. Be realistic. And above all, be flexible.

Special situations are no longer the periphery — they are becoming the pulse of the current market. Those who wait too long for “normal” to return may find they missed the shift entirely.