USA – CALIFORNIA Trends and Developments Contributed by: Derek Liu, Aarthi Belani and Lawrence Lee, Baker McKenzie
Baker McKenzie 600 Hansen Way Palo Alto, California 94304 United States
Tel: +1 650 856 2400 Fax: +1 650 856 2400 Email: Derek.liu@bakermckenzie.com Web: www.bakermckenzie.com
Introduction Tech is eating the world. At the time of writing, the top seven tech stocks – the so-called “Magnificent Seven” – make up roughly a third of the market cap of the S&P 500 stock market index, and drove the vast majority of its returns for the year. Within tech, AI dominates – driving both stock market performance and some of 2025’s largest deals. By the numbers, deal activity in the first half of 2025 matched that of 2022, reflecting the second year of recovery after the nadir of 2023. However, the drivers behind the M&A upswing are markedly different to the last peak in 2021. The 2021 M&A market was largely the by-product of extraordinary, one-off conditions such as record-low interest rates, government stimu- lus, post-pandemic “pent-up” demand that acceler- ated the market and, for tech, a belief that remote work would lead to a transformation of the workplace. The 2025 market has no such tailwinds; instead, there is still hangover from the pandemic recovery, shift- ing regulatory environments, geopolitical uncertainty and rising interest rates. Yet, AI has allowed the tech sector to power through, with the promise (naysayers retort, “delusion”) of AI transforming the very founda- tions of our society and economy. Tech M&A trends and developments in California play a particularly influential role, with the state – and Sili- con Valley – being home to many of the world’s largest and leading tech companies.
Numerical Trends in M&A in 2025: Navigating the Paradox of Record Valuations Amidst Low Deal Volumes Low deal volumes and megadeals defined the first half of 2025 The initial half of 2025 saw a decline of roughly 9% in global deal volume relative to the first half of 2024. Q3 continued this trend, recording only 3,235 deals, which is the lowest level in years. This decline was largely due to the market uncertainty described above. Despite the drop in volume, overall deal values rose by 15% due to large strategic transactions with valuations above USD1 billion. Deals with valuations higher than USD1 billion have risen by 19%, and deals with valuations greater than USD5 billion have risen by 16%. In Q3, the deal values surged by 51.6% year- on-year to USD817 billion, marking a four-year high. Strategic M&A also increased by 11% year-over-year through the middle of this year. Tech M&A deals hold strong amidst market uncertainties Amidst market uncertainties, tech M&A deals have remained robust. A majority of the megadeals this year focused on expanding capabilities, particularly in AI, as opposed to scaling existing business lines. Tech- nology deals were up 184% year-over-year, with deal values of above USD100 million resulting in more than USD109 billion across 54 transactions. The transac- tions ranged from AI and AI-adjacent sectors (such as data centre infrastructures and semiconductors) to more traditional sectors such as healthcare data, cybersecurity companies, energy and renewables, etc.
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