Mergers and acquisitions (M&A) can shake up the market as valuations fluctuate when a business or its assets are consolidated or combined with another. These economic events can trigger action in the secondary markets, where previously issued securities are traded.
Mergers occur when two companies join forces under a new corporate name, while acquisitions involve the takeover of one firm by another. Both can have ripple effects in the public and private secondary markets.
Consolidations such as these can create demand in public secondaries. That’s because companies often sell off non-core assets in the event of a merger, opening doors for smaller firms in the secondary market. Mergers can also lead to new collaborations that impact investment opportunities in the secondary market.
Acquisitions can affect company valuations, which is particularly pertinent in the stock market, where sudden, unexpected gains may materialize after a deal is publicized. Shareholders can benefit further if a bidding war develops or management holds out for a higher offer — although it’s important to note these potential gains always come with correlating risks.
Private secondaries — a sector where “the potential for continued growth is significant,” according to BlackRock — may also be impacted by mergers and acquisitions that involve privately held companies.
The acquisition of a private company by another firm is a liquidity event for its shareholders. Upon its purchase, those shareholders may be able to cash in their stock based on the company’s valuation in the deal.
This has historically been a crucial opportunity for early employees, venture capitalists, and private equity firms to realize their gains from private market investments. But the opportunity is increasingly accessible to a wider pool of investors.
Platforms like Augment Capital*, which enables investors and institutions to purchase and sell stakes in private companies, are leading to a surge of activity in this sector. Secondaries are even becoming a key driver of acquisitions in the private space.
In 2024, the secondary market for private equity funds saw record transaction volumes as investors sought solutions for liquidity generation amid a downturn in dealmaking. More eyes are on the pre-IPO stock space as cash continues to pour in.
M&A deal volume is expected to tick up in 2025 as investors bet on a favorable regulatory environment and almost $3 trillion in uncommitted capital.
Less active areas of the M&A market — such as private equity monetizations, strategic deals, and cross-border transactions — are now poised for growth, according to Morgan Stanley’s 2025 M&A Outlook. Some of this positive forecasting has to do with the favorable antitrust and regulatory environment expected under the Trump administration.
Cross-border M&A deals could also increase in 2025, particularly among European and U.S. companies. This comes as the U.S. economy continues to significantly outpace that of Europe and the U.K., which could lead many of those firms to seek out exposure in the U.S. Meanwhile, stateside companies could look to take advantage of lower valuations across the Atlantic Ocean.
M&A activity, especially large-scale consolidations, can create favorable conditions for businesses in secondary markets. Understanding how this trickles down to the investor level can be the key to adding diversity and liquidity as managers look to take advantage of these occurrences.
When considering private companies, one way to stay abreast of current happenings is to keep an eye on price changes. It’s easier to do so than ever before with the introduction of platforms like Augment Capital.
*Securities transactions are executed on Augment Capital, LLC's ATS and offered through Augment Capital, LLC (member FINRA/SIPC).
Important Disclosures: Investing in private securities involves substantial risk, including the potential loss of principal. Private securities are typically illiquid, have limited pricing transparency, and often require longer holding periods. These investments are available exclusively to qualified accredited investors and offer no guarantee of returns. Additionally, past performance of private securities does not indicate or predict future results.