Equity markets are shaping up to be a vital financing tool for European boards seeking scale via M&A to target growth in an ever-changing and uncertain world.

Take Zurich’s proposed bid for Lloyds of London stalwart Beazley, valuing the target at GBP 8bn. Zurich announced that its GBP 12.80 per share offer would be funded through existing cash, new debt facilities and an equity placing, with the insurer adding that the deal would be earnings accretive by 2027. The deal would make one of Europe’s largest insurers even bigger, allowing it to push into specialty lines underwriting, a targeted area of growth for some time.

The ability to finance transformative M&A with a tool other than debt, or cash on balance sheet, is one of the competitive benefits of a public market listing when businesses debate the push and pull of conducting an IPO.

In a global and continental rush for scale, sources expect Zurich to be just the tip of the iceberg in this year’s equity financing market.

“We expect to see a lot more follow-on activity after a quiet January,” noted an ECM investor. “While there will be secondary blocks, we do expect a pick-up in M&A financing, like we see with Zurich and Beazley.”

While all M&A is designed at the offset to be accretive, not all transformational deals work out quite as expected, just ask Germany’s Bayer following its acquisition of Monsanto, which burdened it with over EUR 30m of debt to fund the merger, which ended up causing huge damage to its share price.

Private equity’s central proposition in creating acquisitive platforms – and often when engaged in take-private transactions – is a willingness to take on leverage that public markets investors would not support. But equity financing allows listed corporates to build the scale they need without a level of debt that would reduce room for manoeuvre if geopolitical chill winds whip up an economic storm.

This blend of pragmatic boldness – targeting transformative deals while maintaining financial headroom – could be just the combination to drive earnings growth in uncertain times.

Market opens for mega M&A financing

The value of European primary follow-on volumes in 2025 was around USD 52bn, 13% higher than the year before.

Primary volumes come in waves in Europe, but are driven more by balance sheet repair, or crisis management – such as during the COVID-19 pandemic years of 2020 and 2021, or by bank recapitalisation deals in the mid-2010s.

These have historically taken the form of traumatic rights issues, with shareholders called on to buy into hugely dilutive deals to save a business.

M&A and growth financing is a different type of deal altogether, with investors far keener to buy into transactions linked to accretive share price growth.

Source: Dealogic

With predictions that M&A deal volumes are set grow in 2026, investors are eager to get a piece.

“There is a broad belief that M&A is indeed going to pick up more momentum this year,” noted another investor. “That can lead to equity opportunities although it is far harder to predict than say a secondary sell-down linked to a lock-up.”

An ECM banker noted that he was in constant contact with clients putting together acquisitions that would likely involve a component of equity financing.

He noted that European ECM was also in a fundamentally different place than during other periods of financing due to the size of deal achievable in Europe today versus even just a few years ago.

Moreover, market reforms and the evolution of the institutional investor base mean large cap-raises that used to be forced down a torturous rights issue pathway, with the deal exposed to a prolonged period of market risk, can now happen overnight – even at multi-billion-dollar volumes.

With global equity markets extremely volatile, that optionality is vital for corporates – and substantially increases the attractiveness of financing M&A with equity. It also means there is less of an opening for opportunistic short positioning against a stock during the weeks of, and preceding, a rights issue.

The key market dynamic and technological drivers pushing boards to opt for scale via M&A outweigh any conversation about how such deals will be funded. Yet access to willing investors and streamlined equity raising processes will help to deliver the large-cap deal flow widely predicted through 2026.

Listed European corporates are set to pull this lever in their efforts to remain competitive and achieve global success.