Wall Street bankers have rejoiced over a merger boom driven by a wave of megadeals that began this spring. But a worrying lull in the third quarter raises questions about how long this dynamic will last.
Global mergers and acquisitions activity slowed sharply in the third quarter compared to the second, according to data from Mergermarket. In the United States, where the decline was even worse, third-quarter M&A activity fell by almost half, to $535 billion.
“We are at a crossroads,” said Lucinda Gutherie, manager of Mergermarket.
According to data from Mergermarket, 2026 is shaping up to be a record year for global M&A deals in terms of 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 revealed in May, can take months to close.
It’s “natural to have a slowdown as the market digests these deals,” Guthrie said, adding that historically the third quarter often quiets down while bankers take vacations.
But the reasons for not reaching an agreement have multiplied in recent weeks, she said.
Market conditions tightened until September when the Federal Reserve raised interest rates by 25 basis points and Treasury yields reached multi-decade highs. A sharp rise in interest rates in recent months has increased financing costs and put pressure on stock values.
Gutherie also highlighted recent calls for the tech industry to slow down and lengthen the race for artificial intelligence. assessment of the American 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,” Erika Najarian, an analyst at UBS, wrote earlier this week.
Prospects for mergers and other trading activity will be in focus for investors later this month when Wall Street’s biggest banks begin reporting quarterly results.
Their forecasts for trading fees have been mixed. Bank of America (BAC) CEO Brian Moynihan noted a year-over-year decline of at least 10% in overall investment banking fees at a Barclays conference last month. JPMorgan (JPM), however, expects growth in the 15% to 15% range, while Citigroup (C) said it expects single-digit growth.
Some analysts remain optimistic that a long-awaited rebound in private equity exits will help support the merger cycle. “We remain convinced that there should be an acceleration in M&A activity,” Chris Kotowski, an analyst at Oppenheimer, said in a note published Friday.
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