BT and Barclays tipped as 'major multiyear rebound' in M&A activity seen

Morgan Stanley forecasts a "major multiyear global M&A rebound," driven by strong equities, lower rates, and increased corporate confidence, with European dealmaking already showing momentum. The bank highlights mining, telecoms, and defence as prime sectors for consolidation, and specifically identifies London-listed BT Group and Barclays, among others, as companies with higher takeover probabilities. This outlook is supported by analysts expecting rising activity driven by growth ambitions and synergy potential in fragmented sectors.

Analysis

Morgan Stanley forecasts a "major, multiyear global M&A rebound," driven by robust global equities, lower interest rates, and enhanced corporate confidence. European M&A activity has already increased by 5% year-over-year, with deal volume up 43% when including private equity and venture capital. This momentum is expected to accelerate, supported by company growth ambitions and ongoing sector fragmentation.

Key sectors identified to benefit from this increased M&A activity include metals and mining, business services, telecoms, and defence, with financials also showing potential. Morgan Stanley's proprietary screening models specifically highlighted London-listed BT Group PLC and Barclays PLC as companies with higher probabilities of receiving takeover offers. Experian PLC, Diploma PLC, and CRH PLC were also noted.

The positive outlook is further supported by strong corporate balance sheets, gradually easing barriers from competition authorities, and attractive funding conditions due to low corporate gearing. A survey of European sector analysts indicates that 60% anticipate a rise in M&A activity over the next 12 months, primarily citing growth ambitions and synergy potential as key drivers.

Key Decisions for Investors

• Investors should evaluate potential M&A targets, particularly in the flagged sectors like telecoms, mining, and defence, and consider companies such as BT Group and Barclays for their increased takeover probability.
• Monitor broader market indicators including global equity strength, interest rate trends, and corporate confidence, as these are critical drivers for the projected multiyear M&A rebound.
• Assess portfolio exposure to companies with strong balance sheets and those operating in fragmented sectors, as these characteristics make them attractive for consolidation and synergy-driven acquisitions.