According to CMS’s 2027 European M&A Outlook, almost two-thirds of dealmakers expect the level of European M&A activity to increase over the next 12 months, in spite of geopolitical turmoil.

Despite the outbreak of war in Iran and the attendant Hormuz crisis – precipitating higher energy prices and renewed inflation – M&A in Europe enjoyed a busy H1. Transaction volume was down just 5% compared to the same period in 2025, but the real story can be found at the top of the deal market – aggregate value climbed by a towering 54% year-on-year, reaching EUR 723bn. Evidently, megadeals were back in force.

Louise Wallace, Head of the CMS Corporate/M&A Group, said: “Optimism prevails amongst dealmakers, despite sometimes challenging and unpredictable circumstances. The reasons behind M&A, including digitalisation, raising capital to fund growth, making the most of distressed opportunities and the narrowing of valuation gaps between buyers and sellers are sparking enthusiasm – we hope potential brakes of elevated interest rates and challenging financing in some sectors do not dampen that optimism in 2027.”

Digitalisation and rising valuations

According to respondents, digitalisation will be the principle buy-side driver of M&A in Europe over the next 12 months, with 33% citing this in their top two and 18% ranking this first, a result consistent with rising digital investment and artificial intelligence outlays. Turnaround opportunities come in second place overall (30%) while consolidation is third (27%).

In a reversal from our last study, when capital raising for expansion in faster growing areas was expected to be the least important sell-side M&A driver, this factor comes out as the most significant this year, cited by 49% of respondents overall.

Financing pains

Over half of respondents (58%) believe financing conditions in Europe will worsen over the next 12 months, reflecting interest rate pressures and tightening credit standards in the region. However, this figure does nevertheless represent a marked improvement from our previous survey, when more than three-quarters of dealmakers (78%) expected financing conditions to deteriorate.

Regarding key sources of capital, half of respondents believe private equity will be the most available financing source over the coming year, given the still-enormous stores of dry powder available to sponsors and the pressure on private equity firms to put that capital to work.

Southern pivot

Though respondents continue to highlight Benelux and the UK & Ireland as the two regions that will see the highest M&A growth over the next 12 months, Southern European markets have recently climbed into dealmakers’ estimations. Nearly a third (31%) of respondents rank Iberia in their top two for accelerating M&A, while 22% say the same of Italy, which last year ranked second bottom. With GDP growth rates in Southern Europe handily exceeding the euro area average, the region is affirming its reputation as a magnet for international M&A.

US influx

Reflecting rising appetite among US buyers for European assets – where targets generally carry less steep valuations than their equivalents in the US might – most respondents (88%) say they have seen more US buyers active in the region over the past 12 months. Respondents expect this cross-Atlantic trend to continue: 95% anticipate seeing more interest from US buyers in European assets over the coming year.

Outlook for 2027

Though megadeals took all the headlines in H1 2026, European M&A over the coming 12 months appears more likely to skew towards value investments. Buyers are on the lookout for turnaround opportunities and are emphasising creative solutions to close valuation gaps. Sellers, meanwhile, are focusing on core business resilience, including considering divestments of peripheral units and raising capital to reinvest in higher-growth segments.

Dr Malte Bruhns, Head of the CMS Corporate/M&A Group, added: “We see European dealmaking shifting from defence to offence in 2026–27, as cash-rich buyers pursue transformative tech, energy transition and scale opportunities. The winners will pair speed with creativity, using bold structures and AI-driven diligence to out-execute amid heightened regulatory scrutiny.”