BCG’s M&A Sentiment Index

BCG’s M&A Sentiment Index leverages our decades of research on M&A market trends, drivers, and success determinants. We calculate the sentiment value as a combination of two factors:

• Fundamental Drivers. This factor captures sentiment derived from underlying drivers of M&A activity, such as business confidence, valuation levels, and interest rates. We identified more than 15 potential drivers of aggregate M&A activity by considering our empirical studies and conducting an extensive review of academic literature, especially on “M&A waves” theory.
• Executive and Investor Sentiment. This factor captures the actual sentiment expressed by decision makers. We employ state-of-the-art generative AI capabilities to extract executive and investor sentiment toward M&A from corporate communications, such as earnings call transcripts. For more details on our approach to leveraging AI-derived sentiment, please refer to the academic paper authored by the team that developed the index.

In developing the index, we relied on academically accepted econometric methods and performed several tests to ensure that the results are statistically and economically significant. We also conducted robustness checks and extensive back-testing using in-sample and out-of-sample data.

We designed the index so that a sentiment value of 100 indicates that deal activity during the next approximately six months is expected to be in line with the historical average over approximately the past ten years. Values that are higher or lower than 100 indicate expectations for above-average or below-average levels of deal activity, respectively. We assess the M&A market’s momentum by comparing the current sentiment value to that of the prior month—a higher value indicates acceleration, and a lower value suggests deceleration.

The BCG M&A Sentiment Index was developed by BCG’s Transaction Center in cooperation with the Professorship of Business Administration, especially International Accounting, of Paderborn University.

In addition to using our own proprietary data and analytics, we collected and collated financial data and relied on information from various data providers, including Refinitiv/LSEG, Bloomberg, and S&P Capital IQ. We also used OECD (2024), Composite Leading Indicator, https://data-explorer.oecd.org/ (accessed on [data-last-updated date]).

BCG will update the M&A Sentiment Index on the fourth Tuesday of each month.

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