FRANCE TRENDS AND DEVELOPMENTS Contributed by: Hugo Sanchez de la Espada, Véronique Millischer, Olivia Chriqui-Guiot, Robin Gaulier and Aurore Cormary, Baker McKenzie
Sustainability and ESG ESG factors have become increasingly important in M&A transactions, with investors prepared to pay higher premiums for targets with a better ESG profile. After a brief slowdown in 2024, investments in clean - tech and ecological transition rebounded strongly in the first half of 2025, with EUR1.26 billion invested across 70 deals. The market now favours mature, scalable companies − especially in renewables, which remains the leading theme for both climate funds and M&A activity. The market should be affected by regula - tory changes in the future, as in 2025 the EC launched a major review of the Sustainable Finance Disclosure Regulation, aiming to simplify the ESG legal frame - work and strengthen requirements to ensure that ESG labels truly reflect sustainable practices. 2026 outlook The outlook for the French M&A market in 2026 remains generally positive − although economic recovery is expected to be moderate. According to the Banque de France (as at 15 September 2025), GDP growth is projected to reach 0.9% in 2026 (fol - lowing 0.7% in 2025), driven by a gradual strength - ening of household consumption and a rebound in private investment. After a sharp decline to 1% in 2025, inflation is expected to rise slightly to 1.3% in 2026, remaining below the European Central Bank 2% target. The unemployment rate is projected to hover around 7.6%. In this context, companies with strong balance sheets and liquidity are likely to benefit from a more favourable interest rate environment and increased levels of corporate distress should enable them to acquire targets at attractive valuations, thus supporting continued M&A activity. The French M&A market will certainly continue to be affected by French political instability and the global geopolitical context. Overall, the French tax context in 2026 remains uncer - tain, owing to a divided Parliament and the fact that no finance bill was passed by the end of 2025. In any case, ongoing tax uncertainty is likely to weigh nega - tively on M&A activity in France.
Sector-specific opportunities The technology, healthcare and finance sectors are expected to continue driving M&A activity in France. The ongoing digital transformation and the need for technological advancements should fuel acquisitions in the technology sector. The consumer goods sec - tor should see increased activity as companies seek to enhance their market presence and capitalise on changing consumer preferences. The defence sector is expected to gain popularity in 2026, boosted by the current international context and, notably, the commitment of NATO member coun - tries to increase their defence spending. However, this remains a highly regulated sector − particularly in France, where foreign direct investment screening is stringent. These restrictions could slow the pace of cross-border deals and limit the sector’s overall growth potential, despite strong underlying demand. Private equity Looking ahead to 2026, private equity firms are expected to play a more significant role in French M&A. Given the limited number of exits in 2024 and the first half of 2025, as well as the pressure to return capital to limited partners (and realise carry for general partners), a higher pace of transactions is plausible as the 2025 pipeline converts. A number of upcoming exits were already announced at the end of the first half of 2025 and the French general elections in May 2027 may further pull forward some exit decisions into 2026, as sponsors may seek to de-risk before an uncertain electoral outcome in a divided political context. However, this trend should be tempered by the growing popularity of continuation funds in the French market, which enables private equity players to retain assets longer while servicing distributions – alongside NAV financing and other liquidity solutions that can reduce the urgency to sell in a still-uneven pricing environment. Regulatory environment The regulatory environment should continue to influ - ence the M&A market in France. The government’s measures to protect strategic sectors from foreign takeovers should impact cross-border transactions. Companies may need to navigate these regulatory challenges and ensure compliance with local laws
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