Industries, particularly high water consumers, are investing in water conservation projects with support from solution providers. The challenge lies in the reluctance of both parties to bear the significant upfront capital.
The 2025 water M&A market outlook
Navigating through uncertainty towards recovery
The global water M&A market weathered significant headwinds in 2024, with transaction volumes falling to their lowest level in six years amid broader macroeconomic uncertainty. Despite this downturn, the latter half of 2024 showed early signs of recovery, driven by stabilizing monetary policy, improved financing conditions, and an increasing focus on water security and infrastructure modernization.
"While overall volume has decreased, the composition of deals has shifted toward strategic-focused transactions that prioritize core business alignment and operational synergies."
As we move into 2025, a pipeline of large, potential transactions and renewed strategic imperatives suggest an inflection point may be approaching, both in the mature markets of North America and Europe where regulatory frameworks and funding mechanisms remain strong, as well as emerging markets such as Brazil, which present an active water infrastructure investment sector while also offering geographical diversification to funds and strategics.
Continually tracking the water sector’s M&A activity, our Global Water Team has conducted an analysis of key trends in 2024 and provided an outlook for 2025.
Macroeconomic uncertainty contributes to drop in transactions and deal value
The global water M&A landscape has entered a period of transformation, marked by a consistent decline in transaction volumes since the post-COVID peak of 760 deals in 2021. The 2024 market recorded 403 transactions, representing not only a 30% year-over-year decline from 2023's 556 deals but also the lowest level of activity in the past six years. This downturn is particularly striking when compared to the pre-pandemic benchmark of 673 deals in 2019.
Deal value has experienced an even more pronounced contraction, falling to $10.6 billion in 2024 from $34.8 billion in 2023—a decline that reflects both reduced transaction volume and a shift in deal composition. The market's peak of $92.8 billion in 2022 now stands in sharp contrast to current levels, highlighting how macroeconomic headwinds have impacted large-scale strategic initiatives.
However, beneath these headline figures lies a more nuanced story of market adaptation and resilience. The second half of 2024 witnessed a notable uptick in activity, with deal count nearly tripling from mid-year levels. This recovery coincided with several positive market developments:
- Stabilization of monetary policy, with recent interest rate cuts providing clearer parameters for deal financing
- Enhanced regulatory clarity across key markets
- Gradual narrowing of buyer-seller valuation gaps
- Improved availability and reduced cost of capital
Looking ahead, several structural factors suggest a potential recovery in transaction activity. Private equity funds have accumulated significant dry powder dedicated to water sector investments, creating pent-up demand that could drive deal flow as market conditions improve.
This financial capacity coincides with a growing imperative for water infrastructure modernization across global markets, while increasing concerns about water security and sustainability are prompting both public and private investment in the sector. Furthermore, the emergence of new technologies is catalyzing innovation-focused M&A activity, as companies seek to acquire capabilities that address evolving water management challenges.
The water sector is heading into the year with increasingly optimistic momentum. This optimism is driven by a convergence of favorable market conditions and strategic imperatives. The stabilization of interest rates and normalization of monetary policy have created more predictable financing conditions, providing decision-makers with greater clarity for transaction planning. This improvement in the financing environment is particularly significant for larger deals, which were notably absent in 2024, as improved access to capital and reduced financing costs should help bridge historical valuation gaps.
For more on the geographical distribution of water M&A activity, including an emerging market that is showing growing momentum, as well as an analysis of water valuation trends, download our 2025 Report today!
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