Demand complementarity emerges when the outputs of firms from distinct industries are used by similar end-users. This paper constructs a measure of the pairwise demand complementarity of firms and examines whether demand complementarity is a key determinant in mergers and acquisitions. Under our measure, about 40% of deals previously classified as diversifying deals can be regarded as demand complementary deals. We find a higher propensity of merger deals and larger merger returns between firms with a higher level of demand complementarity. Higher demand complementarity deals are more likely to be completed and take less time to complete. We also find higher demand complementarity deals have higher sales and market value, and lower SG&A per dollar of sales, post-acquisition. Our results are consistent with an increased market power when acquiring demand complementors and are distinct from well-documented asset complementarity in general.