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Wall Street bankers reveled in a merger boom driven by a wave of megadeals that kicked off this spring. But a worrisome third quarter lull is raising questions about how long the momentum can last.
Global mergers and acquisitions activity slowed sharply in the third quarter from the second where the downshift was even worse, third quarter M&A activity fell by nearly half to $535 billion
“We’re at a crossroads,” said Lucinda Gutherie, head of Mergermarket.
2026 is still on pace for a record year in worldwide M&A deals by dollar value
Huge deals like SpaceX’s (SPCX) $55 billion acquisition of AI coding platform Cursor, announced in June, and NextEra Energy’s (NEE) $67 billion merger with Dominion Energy disclosed in May, can take months to pull together.
It’s “natural to have a slowdown as the market digests those transactions,” Guthrie said, adding that historically the third quarter often lulls while bankers take vacation.
But the reasons not to do a deal have been mounting in recent weeks, she said.
Market conditions tightened through September as the Federal Reserve raised interest rates by 25 basis points and Treasury yields surged to multidecade highs. A sharp rise in interest rates over recent months has raised financing costs and pressured stock values.
Gutherie also pointed to recent calls for a slowdown in the tech industry’s artificial intelligence race and the lengthening toll of the US war in Iran on energy and other prices.
“While some of the investment banking slowdown can be attributed to a long summer … an unhappy bond market implies a deeper freeze in future activity,” UBS analyst Erika Najarian wrote earlier this week.
The outlook for mergers and other dealmaking activities will be in focus for investors later this month when Wall Street’s biggest banks begin reporting quarterly earnings.
Their forecasts for dealmaking fees have been mixed. Bank of America (BAC) CEO Brian Moynihan noted a year-over-year drop of at least 10% in overall investment banking fees at a Barclays conference last month. JPMorgan (JPM), however, has projected growth in the mid-to-high teens, while Citigroup (C) said it expected single-digit growth.
Some analysts remain optimistic that a long-awaited rebound in private equity exits will help sustain the merger cycle. “We are still believers in the notion that there should be an acceleration of M&A activity,” Oppenheimer analyst Chris Kotowski said in a Friday note.
