Political instability is taking a heavy toll on France’s economy and putting M&A dealmakers in the country on the backfoot.

France has been stuck with a hung parliament for a more a than a year after no party was able to secure a majority following a snap election in the summer of 2024. A deadlocked legislature has led to a period of political uncertainty and financial instability.

France’s budget deficit is now the largest in the eurozone and in September French President Macron had to appoint Sebastien Lecornu as his fifth Prime Minister in two years. Political instability and deteriorating public finances have seen Fitch cut France’s credit rating to its lowest level ever.

Stasis puts the brakes on deal decisions

France M&A activity has felt the impact of the political dislocation, with M&A deal value recording a deeper dip in H1 2025 than the wider European market.

According to figures from law firm White & Case and Mergermarket European M&A fell to $382.73 billion in H1 2025, 2% down on figures for H1 2024. Over the same comparative period France M&A value dropped by 8% to $39.65 billion.

When comparing Q1 2025 to Q2 2025 the gap between French and European deal value is even starker, with France recording a 69% quarter-on-quarter decline versus a 15% fall for Europe.

Political stasis has seen prospective inbound investors put deals on hold, with mid-market companies also opting to sit tight through the current period of uncertainty before moving forward with investment and financing decisions.

The volatile macro-backdrop is also pushing more and more businesses into distress. According to Alvarez & Marsal analysis, France recorded the sharpest increase in distress levels in Europe in 2024, with even established French corporate names facing financial difficulties.

This could open up transaction opportunities for turnaround and distressed players, but will make it difficult for mainstream dealmakers to put money to work.

Silver linings

For all the headwinds facing French M&A, dealmakers retain confidence in the resilience of France’s M&A ecosystem, and believe the market will be able to navigate current hurdles, citing the country’s large, globally-active corporates, and leadership in the luxury and energy sectors, as attributes that local and international dealmakers can’t ignore.

Datasite’s EMEA HY 2025 Deal Drivers report, meanwhile, ranks French dealmakers as the third-most active bidders for European deal targets, trailing only the UK and US, with homegrown French-based managers Ardian, PAI Partners, and Sagard all ranked among the ten most active private equity firms by volume in EMEA.

The French market has also showed its ability to continue closing large ticket transactions in the face of macro-economic volatility through deals such as Ardian’s €837 million real estate joint venture with Gucci owner Kering.

French M&A markets look set to face ongoing political volatility over short- to mid-term, but the country’s cohort of sophisticated private equity firms and corporates has the experience and track record to see out the downcycle and continue delivering transaction flow.