The Tech M&A market is expected to be very strong in 2025, driven by factors such as lower interest rates, stronger capital markets, trillions of dollars of dry powder available for investment, the rapidly growing adoption of technologies like AI, and corporate growth through acquisition strategies in areas such as cybersecurity, healthcare, and energy.

Lower interest rates

The U.S. Federal Reserve cut interest rates three times in late 2024 and has held interest rates steady so far in 2025. Because lower interest rates reduce the cost of debt financing, companies have more incentive to borrow for fund acquisitions, and private equity firms have more incentive to pursue leveraged buyouts. Lower interest rates can also lead to higher valuations for targeted companies.

Strong capital markets

Capital markets, especially in U.S. equities and private credit, are expected to be strong in 2025, boosting tech M&A activity. With greater capital availability, as well as lower interest rates and moderation in inflation, companies are expected to be more willing to finance M&As through debt and equity capital markets.

Lots of dry power

With trillions of dollars of dry powder at hand, pent up demand for investment, and recent decreases in the cost of capital, PE activity in the tech M&A market is expected to rise dramatically in 2025. Already in 2025, there were a variety of platform and bolt-on deals involving PE acquirers and PE-backed tech companies, some of them megadeals. For example, PE firm Turn/River Capital paid $4.4 billion in cash for SolarWinds, a software company that helps businesses securely manage and optimize their systems, networks, and IT infrastructure.  And U.K.-based security software company Sophos, a portfolio company of PE firm Thoma Bravo, bought cybersecurity company Secureworks for $859 million.

AI adoption

Already this year, there have been notable deals in the AI space. For example, IBM recently completed its acquisition of cloud computing software company HashiCorp for $6.4 billion. IBM plans to use HashiCorp's products to automate and secure the infrastructure that underpins its hybrid cloud and generative AI offerings. And database vendor MongoDB spent $220 million to acquire startup Voyage AI, a pioneer in embedding and reranking models, to help enterprises build AI applications. It's expected that in 2025, buyers will actively look for and acquire companies that offer AI capabilities to build on their offerings or to boost operational efficiency.

Cybersecurity

Global cybersecurity threats continue to be a concern and a stimulus for tech M&A activity as companies seek to enhance their cybersecurity solutions through acquisition. The cybersecurity sector has already seen a lot of M&A activity in 2025. For example, identity security company 1Password bought SaaS access management provider Trelica to accelerate the delivery of new capabilities in its 1Password Extended Access Management platform. And, in the exposure management subsector, Tenable purchased Vulcan Cyber, enhancing Tenable’s Exposure Management platform.

Deal activity in the cybersecurity space will also be driven in 2025 by AI, as witnessed by cybersecurity company WatchGuard Technologies’ recent acquisition of ActZero with the intent of incorporating ActZero's cross-platform AI-driven threat analysis capabilities into its offerings. And in the U.K., Darktrace, a global leader in AI for cybersecurity, announced a proposed acquisition of Cado Security, a cyber investigation and response solution provider for hybrid and multi-cloud environments. The proposed acquisition underscores Darktrace's planned growth through the development of AI-augmented cyber solutions for its customers.

Healthcare

Tech M&A activity in the healthcare space is also expected to be strong in 2025, with private equity firms likely to be active players in the market. For example, Corum client ImplantBase, a provider of inventory logistics and sales operations software for medical device companies and their distributor networks, was recently acquired by Surgimate, a leading provider of surgical coordination software. Surgimate is backed by PE firm Banneker Partners. PE-involved tech M&A activity in the healthcare segment is expected to increase in response to decreased scrutiny by the new U.S. Republican administration. That decreased scrutiny may also increase PE investment in biotech and pharmaceutical companies.

Energy

The energy sector is also expected to be a significant target for tech M&A in 2025. The increasing demand for sustainable energy solutions has resulted in some huge deals in 2025, such as energy giant Constellation Energy's recent acquisition of natural gas and geothermal power provider Calpine for $16.4 billion. The combination creates a large portfolio of zero- and low-emission generation assets that include nuclear, natural gas, geothermal, hydro, wind, and solar energy sources. The deal also capitalizes on growing AI-driven energy demand. One of the major drivers of the deal is Calpine's power generation capacity to meet the anticipated surge in electricity demand fueled by AI development and usage. It is expected that buyers will look to acquire companies with advanced AI algorithms for optimizing wind and solar power generation, predict weather patterns for better energy output, and manage battery storage systems efficiently.

Some potential issues

Although the outlook for tech M&A activity in 2025 is very positive, there are some potential reasons for caution.

Tariffs

One cause for concern is U.S. President Trump's tariff strategy which may target a variety of U.S. imports, potentially resulting in retaliation on U.S. exports, and generally creating market uncertainty. Some economists worry that this policy will lead to inflation, requiring the Federal Reserve to increase interest rates. If that happens, it would increase the cost of financing tech M&A deals, and potentially decrease deal volume and value. Additionally, if tariffs lead to inflation it could erode investor confidence in the U.S. dollar, potentially weakening it and negatively impacting deal value.

On the opposite end of the spectrum, some economists worry that the tariff policy may lead to recession, which may result in a decrease in overall tech M&A activity because buyers and sellers typically become more risk-averse during recessionary periods.

Global tensions

Another concern relates to global tensions. Tensions with adversarial countries such as China and Iran as well as continued conflict in Eastern Europe pose continued cybersecurity risks, making investment problematic in certain areas of the world and adding complexity to global tech M&A deals. Unfortunately, AI has heightened the cybersecurity risk, making it easier for bad actors to mount cyberattacks against companies. This puts an added burden on companies to protect against these attacks and makes potential financial and strategic buyers more hesitant to do tech M&A deals for those companies.

Regulatory scrutiny

Regulatory scrutiny may increase in 2025 for certain tech sectors such as fintech, which may make buyers more cautious about initiating deals in those sectors, and potentially lead to a decline in overall tech M&A activity. For example, the European Commission, the European Union's executive arm, is closely examining and potentially blocking more M&A deals, particularly in tech sectors, due to concerns about possible anti-competitive practices. This could significantly slow down deal closures and lead to more stringent conditions on acquisitions.

Global debt

Yet another area of concern is the rising amount of global debt, which reached a record high of $315 trillion in 2024. The International Monetary Fund (IMF) predicts that global public debt will reach 100% of global GDP by 2030, and warns that future debt levels could be even higher than currently projected. The growing debt load could lead to a worldwide economic slowdown, depressing investment and M&A activity.

A great time to sell

Even taking these potential issues into account, the overall picture for tech M&A in 2025 is excellent. Corum Founder and CEO Bruce Milne puts it this way:  "The tech M&A market today is incredibly competitive with more buyers than ever and with over $6 trillion in dry powder. There’s never been a better time to sell."