Morgan Stanley, one of Wall Street's largest investment banks, is predicting that global mergers and acquisitions could hit a record $6.4 trillion in 2026. The forecast comes after deal activity rebounded sharply in the second quarter, with announced transactions jumping more than 64% from a year earlier and completed deals rising over 33%.
The bank's analysts say the recovery is broad-based, spanning sectors including software, utilities, energy, and healthcare. After a prolonged slump caused by higher interest rates and market uncertainty, corporate confidence appears to be returning.
What's Driving the M&A Rebound?
For the past two years, rising borrowing costs and volatile markets made many CEOs reluctant to pursue large acquisitions. But Morgan Stanley argues that stronger stock markets and steadier economic confidence have brought buyers back to the table. The bank notes that private capital firms alone are sitting on roughly $4.3 trillion of so-called "dry powder" — money committed by investors but not yet deployed — which could fuel a wave of sponsor-led buyouts.
Another key factor is the regulatory environment in Washington. Morgan Stanley points to a lighter-touch US antitrust stance, which reduces the risk that big mergers will be blocked or delayed. That makes boards more willing to sign deals, knowing that regulatory hurdles are lower than in recent years.
The bank's outlook is broadly optimistic, but it also flags a clear risk: financing costs. If interest rates rise again, deals become harder to justify and fund. Any surprise rate hikes could quickly dampen the momentum.
What It Means for Investors
For everyday investors, the surge in M&A activity matters for several reasons. First, the jump in announced deals is a leading indicator, but the real money for banks comes when transactions close. Morgan Stanley's note that completions rose more than 33% in the second quarter is more significant for near-term earnings than the headline growth in announcements.
Second, many acquisitions involve new bond or share issuance to fund them. Banks earn underwriting fees for arranging that financing, so a busy M&A pipeline often boosts investment-banking revenue. When the largest US banks report second-quarter results next week, investors will be watching for signs that the rebound is already showing up in fee income and capital-markets activity — not just in deal press releases.
Morgan Stanley has also highlighted that the M&A boom could benefit certain advisory-focused banks. In a separate note, the bank said it sees big corporate M&A lifting firms like Evercore and Moelis, while cutting forecasts for Houlihan Lokey. You can read more in our article Morgan Stanley Sees Big Corporate M&A Lifting Evercore and Moelis, Cuts Houlihan Lokey Forecasts.
Broader Market Context
The M&A rebound comes amid a broader shift in investor sentiment. Stronger equity markets have made it easier for companies to use their own stock as currency for acquisitions, while private equity firms are under pressure to deploy the record levels of capital they raised during the low-interest-rate era.
Morgan Stanley's $6.4 trillion forecast would surpass the previous record set in 2021, when ultra-low rates and pandemic-era stimulus fueled a dealmaking frenzy. That year, global M&A volume reached roughly $5.9 trillion, according to data from Refinitiv.
The bank's optimism is not without precedent. Other Wall Street firms have also noted a pickup in deal activity, and the JPMorgan recently launched a new team to target mid-market M&A deals, as we covered in JPMorgan Launches New Team to Target Mid-Market M&A Deals.
Risks to Watch
While the outlook is bright, investors should keep an eye on interest rates. Central banks around the world have signaled that they may keep rates higher for longer to combat inflation. If borrowing costs rise unexpectedly, it could make financing deals more expensive and slow the momentum.
Another risk is geopolitical uncertainty. Trade tensions, conflicts, or regulatory changes in other regions could also dampen cross-border M&A. For now, however, Morgan Stanley sees the balance of risks tilted to the upside.
For everyday investors, the key takeaway is that a busy M&A market often translates into higher fees for banks and advisory firms, which can boost their stock prices. But it also signals confidence among corporate leaders, which is generally positive for broader markets. As always, it's important to watch the details — especially whether announced deals actually close — rather than getting caught up in headline numbers.
