"The most important transactions that took place in Cyprus in 2025 had a strong strategic significance as well as local and regional dimensions, including the acquisition of smaller banks by existing market players and accelerated consolidation in the insurance sector," Michalis Stephanou, Partner, Advisory Leader, Head of Deals, PwC Cyprus suggests.
"In addition, we saw transaction activity in sectors with strong prospects for growth and improved returns because of fundamental demographic and institutional changes in specific industries, like healthcare, tourism, renewables and education," the expert continues.
Speaking to GOLD magazine about the mergers and acquisitions trend that was particularly evident in Cyprus last year, Stephanou also notes comments that, "M&A has always been an important tool for Cypriot businesses to acquire access to a wider client base, expand their product portfolio and achieve revenue and cost synergies."
Among other things, the Partner at PwC Cyprus, in addition, shares his thoughts on whether or not he anticipates 2026 to resemble the dynamics of 2025 or whether the market is entering a different phase.
2025 was defined by geopolitical conflict, shifting trade policy and market volatility. How did these forces affect deal flow and valuations on the global stage?
In 2025, global mergers and acquisitions (M&A) activity experienced a mixed recovery amid heightened geopolitical tensions, evolving trade policies and persistent market swings. While deal volumes generally declined or remained subdued compared to prior years, aggregate deal values surged, reaching approximately $4.5 trillion to $5.1 trillion globally, marking a 40-50% increase from 2024 levels, largely propelled by a wave of megadeals. Market fluctuations, fueled by persistent inflation, high interest rates early in the year and economic uncertainty, initially suppressed deal appetite by elevating financing costs and eroding investor confidence. Global EV/EBITDA multiples dropped to 10.8x in the first half, down 14% from late 2024, reflecting tariff concerns and debt pressures. Private equity exits stalled, with over 30,000 portfolio companies remaining on books and hold periods extending to an average of 5.8 years. However, as rates stabilised, volatility moderated, enabling a rebound in large transactions and improving valuations in high-growth areas like AI and renewables.
Did Cyprus largely track global M&A trends in 2025 or did local conditions, such as regulation and market depth, drive a different outcome?
Traditionally, the Cypriot economy has been marked by a small number of large transactions that shape economic activity in the short to medium term. 2025 was a particularly active year in the M&A space in Cyprus, especially in sectors with higher potential for strong returns and sound strategic fit for the buyers. The most important transactions that took place in Cyprus in 2025 had a strong strategic significance as well as local and regional dimensions, including the acquisition of smaller banks by existing market players and accelerated consolidation in the insurance sector. In addition, we saw transaction activity in sectors with strong prospects for growth and improved returns because of fundamental demographic and institutional changes in specific industries, like healthcare, tourism, renewables and education.
Which sectors and/or segments in Cyprus emerged as the most active or attractive for transactions, and which, if any, look most promising going forward?
The long-awaited consolidation in the insurance sector finally took place in 2025 in a very efficient and sophisticated fashion. The three major banking institutions completed important deals to expand their presence in the insurance market and leverage their client base via bancassurance contracts. At the same time, interest from regional and international investors in businesses in the banking, hospitality, healthcare, education and energy sectors remained very strong. Most of these deals took place at favourable valuations, indicating the potential for better returns but most importantly reflecting the healthy state of the Cypriot economy. In addition, several deals concerning the disposal of non-performing or re-performing loans to private equity funds or asset management companies were completed during the year. Going forward, more M&A activity can be expected in the tourism sector as well as in education and healthcare. All these sectors have strong fundamentals and the capacity for improved returns and scalability; hence it will continue to attract interest from regional and even international investors.
In today’s environment, when does M&A make strategic sense for Cypriot businesses and what benefits does it offer?
M&A has always been an important tool for Cypriot businesses to acquire access to a wider client base, expand their product portfolio and achieve revenue and cost synergies. In addition, rapid technological expansion can become another strong incentive for deals, as existing businesses can catch up with technological developments by acquiring startups or even more technologically advanced players and seize the benefits of the enhanced sophistication and efficiency driven by advanced technological systems to the top as well as the bottom line of the combined business. Whilst, in theory, all the above benefits can justify the pursuit of certain transactions, in practice such benefits cannot be realised without proper planning, adequate diligence and the smooth execution of the transaction. A thorough assessment of the post-deal strategy, discipline in the implementation of the strategic plan for the combined entities, including potential staff layoffs, systems integration and business transformation, are key to the success of any deal.
Do you expect 2026 to resemble the dynamics of 2025 or is the market entering a different phase? If so, what will be the key drivers of that shift?
As far as the Cypriot market is concerned, the sectors that will continue to attract capital and interest from investors are hospitality, education, energy (especially renewables) and healthcare. In addition, given the consolidation that has already taken place in the banking and insurance sectors, more deals are expected involving non-performing loans (albeit for smaller tickets) and transactions related to technological developments and advancements. At a global level, the volume of deals is expected to increase and valuations will improve on the expectation that market conditions will stabilise and technological innovation will drive strategic initiatives and M&A activity. Geopolitical conflicts and other macroeconomic developments will continue to shape the volume of M&A activity as well as the associated transaction multiples but, as the world becomes less sensitive to market turbulence and lack of predictability, these factors will have less impact on transaction activity.
This interview first appeared in the January edition of GOLD magazine. Click here to view it.
