Two Readings of One Quarter: What Falling Deal Volume Means for Owners

Preliminary figures from LSEG show global M&A volume down 49 percent from the second quarter, ending a run of six straight quarters above $1 trillion. Yet BCG's count through August shows deal value up 15 percent from a year earlier. Both are accurate, and reading them together tells an owner more than either does alone.

What the Third-Quarter Numbers Show

LSEG's preliminary data, reported by Axios on September 18, put global M&A volume for the third quarter down 49 percent from the second, with deal count down 39 percent. Against the same period a year earlier, volume is down 26 percent and count is down 41 percent. The United States fell further: volume dropped 61 percent from the second quarter and count dropped 46.5 percent.

The largest transactions account for much of the swing. LSEG counted nine deals of $10 billion or more in the third quarter, compared with 27 in the second. Those figures are preliminary and were published before the quarter closed, so they will move. The direction, though, is clear enough that LSEG's deals intelligence director, Matthew Toole, called it “more dramatic than other pauses we've seen,” adding that “the macro issues are probably causing some buyers to question their models.”

The reasons cited are familiar from recent months: high oil prices, persistent inflation, an expectation that interest rates will rise, and lingering concern over the downturn in software valuations. Each of those feeds directly into the two numbers a buyer controls, which are how much debt the deal can carry and what growth rate the buyer is willing to pay for.

What the Year-to-Date Numbers Show

BCG's report covers January through August and reads very differently. Global deal value is up 15 percent from the same months of 2025 and sits 11 percent above the ten-year average. The count of megadeals reached 37, against 24 a year earlier, which already exceeds the full-year record of 32 set in 2021. North America accounts for more than half of global value.

The strength is narrow, though. BCG notes that deal volume below $1 billion remains depressed compared with historical norms, which is the range where most privately owned companies transact. Its M&A Sentiment Index rose to 83 from 79, but that is still well under the long-term average of 100, and the spread by sector is wide: financial institutions and real estate score 108, healthcare 100, industrials 66, consumer 64, and technology 52.

Why Both Can Be True

The two reports measure different things over different windows. LSEG compares one quarter with the one before it, and the second quarter was unusually strong, with 27 megadeals. BCG measures eight months against the same eight months a year earlier. A sharp drop from a peak can sit comfortably beside a year that is still ahead of trend.

The more useful question is what is holding deals back. BCG's answer is specific: of the five tests it applies to whether a deal can be executed, the two that constrain the market most are asset readiness and valuation gaps. Financing and organizational capacity are much smaller obstacles. Asset readiness means a business is prepared to be examined, with clean financials, documented contracts, and a story that survives scrutiny. A valuation gap is the distance between what a seller expects and what a buyer will pay, and it tends to widen when buyers are unsure about rates, inflation, and growth.

That framing shifts the conversation. If capital were the problem, an owner could do little except wait. Because readiness and price expectations are the problem, a good share of the outcome sits within the seller's control.

What This Means for an Owner Planning a Sale

Start with timing, and be careful about reading a quarterly figure as a verdict. A one-quarter decline in global volume, much of it in very large deals, says little about whether a buyer for a $20 million company with steady cash flow is still active. Ask your advisor for current activity in your own sector and size range rather than relying on headline totals.

Next, expect buyers to underwrite with more caution. When a buyer questions its own model, it usually shows up in the offer as a lower multiple, a larger share of the price deferred into an earnout or seller note, or a longer diligence period. None of that means a deal is off. It means the terms deserve closer reading than the headline price.

Finally, use a slower market to get ready. Readiness is the one variable a seller can change on a schedule. Buyers examine reported earnings closely, which is the purpose of a quality of earnings review: a buyer's accountants test which profits are recurring and which are one-time, and adjust the price accordingly. A seller who has already done that work, and who can explain every adjustment, spends less time defending the number and more time negotiating from it.

What to Watch Next

Three developments will show whether the third-quarter drop is a pause or a shift. The first is the final third-quarter tally, which will replace today's preliminary numbers. The second is the path of interest rates, since the expectation of increases is one of the reasons buyers give for holding back. The third is whether deal volume below $1 billion recovers, because that segment has lagged all year and is where BCG's data shows the recovery has not yet arrived.

For owners, the practical point is that a hesitant market rewards preparation. A hesitant market tends to favor sellers whose businesses leave fewer questions unanswered.