Mergers and acquisitions are gradually rebounding. As we noted in our last note, the conditions for a strong second half are falling into place: activist activity is rising, and several soft catalysts are re‑emerging, paving the way for a meaningful pickup in deal flow.
Carmignac Portfolio Merger Arbitrage Plus returned 10.94% since inception1, equating to an annualized performance of 4.62% with a volatility of 2%. Its equity beta of 0.03 underscores its minimal sensitivity to market movements, reinforcing its role as a robust, uncorrelated strategy within a diversified portfolio.
Buyers are getting their elbows out
While 2024 marked the beginning of an M&A recovery, post-election geopolitical volatility proved more intense than anticipated, disrupting corporate confidence and slowing deal activity. Yet 2025 has met those headwinds with resilience: year‑to‑date volumes are solid especially in Europe and Asia and, notably, much of this activity has been concentrated in the past few months, setting the stage for a dynamic and potentially rewarding second half of the year.
M&A is making headlines in the last months. Rail M&A conversation is a frequent topic lately and we saw Union Pacific’s planned $85 billion cash-and-stock takeover of Norfolk Southern; Baker Hughes is set to acquire Chart Industries in a $13.6 billion all-cash deal which is roughly a 30% premium to earlier proposal by Flowserve; and Palo Alto Networks announced a rare public-to-public cybersecurity transaction valuing CyberArk at more than $20 billion.
July in particular, saw a surge in public M&A activity, with 11 announced deals exceeding $1 billion, totalling approximately $165 billion in deal volume, the highest monthly level in recent years. We also saw a return of larger-scale public M&A with 4 deals of $10bn or greater during the month.
August was anything but quiet for dealmakers — Keurig Dr Pepper’s $18 billion bid for Dutch giant JDE Peet’s signals not only the birth of a new coffee powerhouse, but also underscores the continued momentum of cross-border M&A.
Mega-deal momentum and sector breadth are clearly back offering fertile ground for merger-arbitrage investors. Even more encouragingly, market “animal spirits” are returning, reinforcing the outlook for attractive returns.
COMPETING BIDS PICKING UP IN 2025
Indeed, the competitive dynamics in the M&A market have intensified. Data show a sharp rise in bidding wars, with strategic acquirers and especially private‑equity sponsors demonstrating their pricing power through sweetened deals and more favourable terms. Historically, these high-competition environments have been where merger arbitrage strategies deliver their strongest alpha, making this an especially opportune moment.
The most painful for a merger arbitrage portfolio are the terminated deals, so this year’s sharp drop in break-ups is a welcome tailwind. Several shifts are driving the improvement: the new U.S. administration now leans toward negotiated remedies rather than outright blocks, giving investors clearer regulatory visibility; meanwhile, easing tariff pressures, softer inflation and falling policy rates have removed much of the macro uncertainty that previously derailed transactions.
Importantly, the portfolio management team has a consistent and proven 20-year track record built on a robust qualitative and quantitative investment process, has enabled us to reduce the market failure rate by 50%. Together these factors have materially lowered deal‑termination risk and improved the strategy’s reward profile.
TERMINATION OF US STRATEGIC DEALS DOWN IN 2025
More opportunities on the horizon
Amid volatility and equity dislocations, opportunities arise. As the M&A landscape continues to regain momentum, the availability of sponsor dry powder coupled with rising activism and geographic valuation gaps is expected to catalyse deal activity and allow to cross-border deals.
At the same time, merger arbitrage investors benefit from improved remuneration for spreads, significantly lower termination risk, greater regulatory visibility, and a backdrop of falling interest rates, all of which enhance the strategy’s risk‑adjusted return profile.
Goldman Sachs reported in early August 2025 that annualized merger arbitrage spreads in the US had a median2 of 7.7% based exclusively on announced deals. While spreads briefly widened during April’s tariff‑related stress, they have since normalised, returning to levels broadly in line with historical averages. This normalization, combined with strong deal momentum, underpins a constructive outlook for merger arbitrage strategies.
Carmignac Portfolio Merger Arbitrage Plus (CMAP) (I EUR share class) is in positive territory with a performance of +3.71% year-to-date.3 Investing in officially announced deals allows us to navigate the market and seek returns uncorrelated to market moves. Thanks to a diversified portfolio, the Fund recorded a maximum drawdown of just -1.35%, which was fully recovered within 16 days, underscoring its ability to provide decorrelated returns during periods of heightened volatility.
Strategy reminder
| STRATEGY | Officially Announced Deals + Non-Binding Proposals + Post Offer |
| INVESTMENT UNIVERSE | M&A deals in developed countries |
| PORTFOLIO DIVERSIFICATION | 40 to 60 positions |
| LONG EXPOSURE (IN % OF NAV) | 0% to 250% |
| SHORT EXPOSURE (IN % OF NAV) | 0% to -250% |
| GROSS EXPOSURE (IN % OF NAV) | 0% to 500% |
| NET EXPOSURE (IN % OF NAV) | 0% to 250% |
| MAX DRAWDOWNS PER POSITION | All deals: 250bps |
| RISK/RETURN PROFILE | 2 – 4% volatility; Target Return – Ester + 400bps |
| LIQUIDITY | Daily |
| ESG INTEGRATION | SFDR Art. 8 |
| LEGAL STRUCTURE | Luxembourg-based UCITS |
| AUM | €222 million |
1Data as of 31/07/2025. The Fund has been launched on 14/04/2023.
2Median: half the deals that trade at a tighter spread and half at a wider one.
3Carmignac. Data as of 31/07/2025.
Carmignac Portfolio Merger Arbitrage Plus
Carmignac Portfolio Merger Arbitrage Plus I EUR Acc
- Recommended minimum investment horizon
- 3 years
- Risk indicator*
- 4/7
- SFDR - Fund Classification**
- Article 8
*Risk Scale from the KIID (Key Investor Information Document). Risk 1 does not mean a risk-free investment. This indicator may change over time. **The Sustainable Finance Disclosure Regulation (SFDR) 2019/2088 is a European regulation that requires asset managers to classify their funds as either 'Article 8' funds, which promote environmental and social characteristics, 'Article 9' funds, which make sustainable investments with measurable objectives, or 'Article 6' funds, which do not necessarily have a sustainability objective. For more information please refer to https://eur-lex.europa.eu/eli/reg/2019/2088/oj.
Main risks of the fund
Fees
- Maximum subscription fees paid to distributors
- 0,00%
- Redemption Fees
- 0,00%
- Conversion Fee
- -
- Ongoing Charges
- 1.11%
- Management Fees
- 1,00% MAX
- Performance Fees
- 20,00% of the outperformance to the reference indicator over the year. Performance fee is not charged until previous underperformance is offset
Footnote
Performance
| Carmignac Portfolio Merger Arbitrage Plus | 3.2 | 3.7 | 3.7 |
| Carmignac Portfolio Merger Arbitrage Plus | + 5.2 % | - | + 4.6 % |
Source: Carmignac at 31 Jul 2025.
Past performance is not necessarily indicative of future performance. Performances are net of fees (excluding possible entrance fees charged by the distributor).
Reference Indicator: -
Articles that may interest you
Marketing communication. Please refer to the KID/KIID, prospectus of the fund before making any final investment decisions. This document is intended for professional clients.
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