A Chill in the Air: M&A Deals Decelerate

as the first quarter of 2025 concludes, a significant slowdown in mergers and acquisitions (M&A) is forcing Wall Street to recalibrate its initial optimistic forecasts. Contrary to expectations of a “Trump recovery” following the November election, deal activity has cooled considerably. This deceleration arises from a combination of factors, including stock market volatility and uncertainty surrounding the new management’s policies.

Data from Dealogic paints a clear picture: the number of deals announced since January represents the slowest pace in over a decade. Globally, approximately 6,600 transactions where declared this quarter, marking a 30% decrease year-over-year and a staggering 44% drop from the peak activity observed in 2021. This downturn impacts major players like Goldman sachs and smaller firms across the U.S.

The U.S. market, typically a powerhouse of M&A activity, is particularly sensitive to shifts in the political and economic climate. The Trump administration’s stance on trade, regulation, and antitrust enforcement is creating a climate of apprehension among corporate executives. This uncertainty is compounded by broader economic concerns, as evidenced by the recent dip in the S&P 500 index.For example, the potential impact of tariffs on imported goods is causing companies to rethink cross-border deals, while regulatory uncertainty is delaying decisions on domestic mergers.

The “Trump Affect”: Policy Uncertainty and Regulatory Scrutiny

Companies are facing headwinds in planning expansions and acquisitions due to the administration’s commitment to imposing tariffs and the evolving landscape of global regulatory bodies. the appointment of officials with a stricter approach to antitrust enforcement, such as gil Slter, has further rattled Wall Street, which had initially anticipated a more lenient regulatory environment. This is particularly concerning for companies in sectors like technology and healthcare, where mergers often face intense scrutiny.

Jonathan Corsico, head of integration and acquisition activity at the Simpson Thacher office in Washington, D.C., aptly summarizes the situation: “There is always a lack of certainty when a new American administration comes to power, but the uncertainty that exists today exceeds what it has passed before.” This sentiment reflects the broader unease felt by dealmakers navigating the uncharted waters of the new political era.

Adding to the complexity, the Chairman of the federal Communications authority (FCC) recently warned of potential bans on deals involving companies with “hateful forms of diversity, equality and integration.” This statement underscores the administration’s focus on social and cultural issues, which could have significant implications for M&A activity in various sectors. As a notable example,companies with strong diversity and inclusion programs may face challenges in acquiring or merging with companies that do not share the same values.

Deals of Size, But Fewer in Number

Despite the overall slowdown, the value of announced acquisition offers has increased by 14% compared to the same period last year, reaching approximately $812 billion, according to Dealogic data. Though, this increase is largely attributed to a handful of mega-deals, masking the broader decline in transaction volume.

Notable examples include Alphabet’s (Google’s parent company) planned acquisition of cybersecurity firm Wiz for $32 billion, marking its largest acquisition to date. BlackRock also made headlines with a $23 billion deal to acquire a portfolio of ports, including two on the Panama Canal, from CK Hutchinson, a Hong Kong-based company. Moreover, Sycamore Partners agreed to purchase the Walgreen Boots Alliance pharmacies.

These high-profile deals demonstrate that strategic acquisitions remain a priority for some companies, particularly those seeking to expand their market share or enter new sectors. however, the overall trend suggests that many companies are adopting a more cautious approach, prioritizing organic growth and internal investments over large-scale acquisitions. This is especially true for smaller and mid-sized companies, which may lack the resources to navigate the current uncertain environment.

Private Equity Steps Up,But Recovery Remains Elusive

Private equity firms,facing pressure to deploy capital and generate returns for investors,have increased their activity in the M&A market.The value of buyouts and acquisitions backed by financial sponsors has risen to $295 billion, compared to $160 billion in the same period last year. This surge in private equity activity provides some support to the M&A market, but it is not enough to offset the broader slowdown.

Despite the efforts of private equity firms and the occasional mega-deal, the overall recovery in M&A activity remains elusive. Investment bankers and advisors had anticipated a rebound after two years of relative calm, but their expectations have been dashed by the prevailing uncertainty. As Navin Narata, co-chair of American investment banking at Evercore, observes, “We are witnessing a concept delay in recovering the integration and acquisition activity.”

While discussions with clients regarding potential deals are ongoing, chief executives and boards of directors remain hesitant to pull the trigger. The market’s desire to explore deals is evident, but the appetite for actually closing them is lacking. This cautious approach reflects the broader economic and political anxieties that are weighing on corporate decision-making. Such as, companies are concerned about the potential for increased regulation, trade wars, and economic recession.

“The market desire to consider the deals is strong, but the appetite for the conclusion of deals is not the same force.”

Navin Narata, Evercore

IPO Market Struggles, Banks Adjust

The initial public offering (IPO) market is also struggling to gain traction. Despite companies like Core Wove, Stab Hab, and Claarna testing the waters with share offerings, IPO revenues are only marginally higher than last year and considerably lower than the levels seen in 2021 and 2022, according to data from the London Stock Exchange Group. This lackluster performance has prompted some banks and law firms to adjust their hiring plans.

Will Leshaze, founding partner of Baltram Executive Research, notes that “the banks will want to set the best talents.” He adds, “As we approach the end of the first quarter, many of our customers indicate that the growth of employment is in the process of stability and not about the increase that many of them witnessed at the beginning of the year.” This suggests that the hiring boom experienced by some firms in anticipation of a strong M&A and IPO market is now leveling off.

At Goldman Sachs, sources indicate that teams with fewer deals will not be replacing junior bankers who leave. This decision reflects the bank’s efforts to manage costs in a challenging market environment. Goldman Sachs declined to comment on the matter.

Looking Ahead: Awaiting Clarity and Stability

The current market volatility is making it tough for buyers and sellers to agree on valuations. however, consultants believe that deal activity could rebound once there is greater clarity regarding antitrust policy and the overall economic outlook. As Stephen Beck, head of integration and acquisition department in Europe, the Middle East and Africa at Barclays, points out, “It seems as if there is a less clear amount of evaluations compared to the above.” He adds, “There are many deals that have been postponed or are still waiting and can be revived quickly.”

For U.S. businesses, the key to unlocking pent-up M&A demand lies in navigating the uncertainties of the trump era. Companies must carefully assess the potential impact of new policies on their operations and develop strategies to mitigate risks. A proactive approach to regulatory compliance and a willingness to adapt to changing market conditions will be essential for success in the months ahead. This includes conducting thorough due diligence, engaging with regulators, and developing contingency plans.

While the short-term outlook remains uncertain, the long-term fundamentals of the M&A market remain strong. As the U.S.economy continues to grow and companies seek to innovate and expand, strategic acquisitions will continue to play a vital role. The current slowdown may simply be a temporary pause before the next wave of dealmaking activity. Companies that are well-prepared and adaptable will be best positioned to capitalize on future opportunities.