EBM Newsdesk Analysis
18 May 2026. Europe is doing deals again — and this time Brussels is cheering it on. European M&A hit $746 billion in 2025, up 12% on the year before, with the second half surging 23% versus the first. Now, with the Draghi report reshaping how the European Commission thinks about competition, the deals getting discussed in 2026 are bigger, bolder, and structurally different from anything Europe has attempted before. The EU is moving from blocking mergers to building champions — and the industries in the firing line are telecoms, banking, defence, and financial services.
For decades, the European Commission’s approach to M&A was simple: if a merger reduced competition, block it or impose conditions. Consumer prices were the primary test. Scale was a secondary concern. The results were predictable. Europe’s telecoms sector fragmented into dozens of national operators too small to invest properly in 5G infrastructure. Its banking sector fractured into hundreds of lenders too small to compete with JP Morgan, whose market capitalisation alone exceeds the ten largest EU banks combined.
Mario Draghi’s 2024 competitiveness report changed the conversation. Released to widespread alarm among European policymakers, it described Europe’s trajectory as “slow agony” unless it built genuine scale in strategic sectors. The report’s core argument on M&A was blunt: European competition policy had been too focused on short-term consumer prices and had lost track of the global digital economy, where companies need scale to compete and innovate at all. In telecoms specifically, Draghi called for “modifying the EU’s stance towards scale and consolidation” as the “cornerstone initiative” for delivering a true single market. Germany and France responded in a joint article calling for competition rules that allow “world-class European champions” to emerge in key sectors.
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SubscribeThe Commission has listened. A public consultation launched to review EU merger guidelines — examining how innovation, efficiency, resilience, and investment intensity should be weighed in merger assessments — signals that Brussels is preparing the regulatory ground for a new era of consolidation. Regulators, for the first time in a generation, are described as “increasingly amenable to wider pro-growth policy goals” and “more open to large-scale mergers, including 4-to-3 deals that previously faced significant competition barriers.”
Where the Deals Are Coming
Telecoms is the most active front. In France, Bouygues, Iliad, and Orange have submitted a joint €17 billion offer for SFR, the operator controlled by Patrick Drahi’s Altice. The deal — a three-way carve-up of a major national operator — is exactly the kind of transaction that would have been strangled at birth by Brussels five years ago. In the new regulatory environment, it is being actively encouraged. The SFR transaction, if it completes, would set the template for consolidation across every other fragmented European telecoms market.
Banking consolidation is the other major front. UniCredit’s pursuit of Commerzbank — still unresolved but still live — represents the most significant attempted cross-border bank merger in Europe since the financial crisis. The Draghi report’s argument that European banks need “a truly continental span of operations” to properly support European companies has given political cover to deals that previously generated nationalist resistance. Financial services consolidation more broadly is accelerating, with banking and asset management combinations described by dealmakers as the most active segment in the European M&A pipeline.
Defence is the fastest-growing category. European defence budgets are moving toward unprecedented targets following Russia’s sustained aggression and the retreat of American security guarantees. Full order books and fragmented supply chains are driving major players to execute bolt-on acquisitions of drone, AI, and ammunition manufacturers. Rheinmetall’s €73 billion backlog is the number that tells you everything about where the money is going.
The Financing Question
The deal pipeline is strong. The financing environment is more complicated. Seventy-eight per cent of European dealmakers expect financing conditions to worsen over the next twelve months. Cash reserves are expected to be the primary financing source for 51% of respondents, with debt capital markets used by 38%. Alternative structures — convertible instruments, earnouts, seller financing — are being considered by two-thirds of dealmakers as a result of tighter lending standards.
The same interest rate environment pressuring European banks is making leveraged acquisition financing more expensive than it was in the 2019-2022 window when private equity bought into European football, infrastructure, and financial services at historically cheap rates. Sovereign wealth funds and insurance capital are increasingly competing with banks as deal financiers — creating new structures but also new timelines and new governance expectations.
The American Angle
Wall Street is watching. With US mega-deals hitting domestic antitrust walls under a Justice Department that remains active despite the change of administration, American corporate cash and private equity capital are moving toward undervalued European mid-caps in technology, infrastructure, and financial services. The ECB’s rate trajectory — three hikes now priced into year-end — will matter for deal economics, but the fundamental argument that European assets are cheap relative to their American equivalents is driving sustained cross-border interest regardless of the rate environment.
The Benelux region is expected to see the highest M&A growth of any European sub-region over the next twelve months, followed by the UK and Ireland and then Austria and Switzerland. The Netherlands showed a 171.6% increase in M&A value in 2025 — the largest percentage increase of any major European market. Spain was up 63% and Belgium 57%. The geography of European M&A is shifting, with smaller markets that previously sat on the sidelines now becoming active battlegrounds.
The Draghi Scorecard
One year after the Draghi report’s publication, only 11.2% of its 383 recommendations had been fully implemented. The M&A regulatory shift is one of the areas where progress has been real. The merger guideline review is live. The language from Brussels has changed. The SFR deal is being allowed to proceed.
But the investment gap Draghi identified — €800 billion per year in additional spending needed to close the gap with the US and China — remains almost entirely unfunded. The European Competitiveness Fund proposed in response would cover less than a tenth of that gap over seven years. The EU’s confrontation with China on trade and its strategic dependence on Chinese supply chains for the green transition make the scale question more urgent, not less.
M&A is one tool. It is not the whole answer. But in 2026, it is the tool Europe is reaching for most actively — and the regulatory framework that blocked the last generation of European champion deals is finally being dismantled.
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