Dealmakers’ post-election optimism has fizzled amid Trump-induced economic uncertainty. Are deals dead or just delayed?
Inthe days after Donald Trump sealed his return to the presidency last November, Wall Street celebrated the prospect of lower taxes, looser regulation and less fervent antitrust enforcement—all setting the stage for a quick resurgence of merger and acquisition deals.
Certainly conditions seemed ripe for an M&A boom. The number of deals had been declining since 2021, partly because of the perceived anti-merger views of President Joe Biden’s regulators, but even more so because of the Federal Reserve’s campaign, beginning in March 2022, to quash inflation with higher interest rates. Private equity firms, which had spent the last half-decade raising ever larger piles of cash, were collectively sitting on about $1 trillion of “dry powder” in the U.S., even as they struggled to divest businesses they already owned to generate payouts for earlier investors. And small and mid-sized companies whose stocks had languished for years seemed ripe for takeover.
Now, the Federal Reserve was finally cutting rates and Trump was moving back into the White House. Time for the deals to begin! Or so the investment bankers thought.
So far, it hasn’t happened. The primary culprit is Trump’s tariff policy and erratic moves, which have sparked fears of an uptick in inflation (meaning a slowing or halt to Fed rate cuts) and of an economic slowdown. Investment bankers and M&A lawyers are still hopeful that a revival is around the corner, but the outlook is foggy and they’re getting nervous.
“The perceived chaos around policy is causing a degree of paralysis and delay,” says long-time bank watcher Mike Mayo, now a managing director and head of large bank research at Wells Fargo Securities. “The bull case is easy to articulate, but that’s been around for enough months now that investors are getting impatient. If it’s July 4 and we’re still having this discussion, then this capital markets cycle could be driven into a ditch.”
According to Dealogic data, 2,006 mergers and acquisitions worth at least $100 million have been announced in the U.S. this year through March 24, down 24% from 2,640 deals in the same time period last year and off 45% from 2021. The 2025 tally is the smallest number of early-year deals in more than a decade and appears to be trending in the wrong direction. Law firm Paul Weiss’ M&A practice reported in its monthly newsletter that the 664 deals worth at least $100 million in the U.S. in February marked a 33% decline from the number in January.
“It’s not like we’ve taken a pause for January and February and it’s roaring back,” says Larry DeAngelo, global co-head of corporate finance at investment bank Houlihan Lokey, the top M&A advisor for private equity in the U.S. “It feels like it’s at least going to be probably in the third quarter before some of these things start to get through the system and people make more concrete plans based on more firm policy.”
More firm policy is a polite way of putting it. Trump’s habit of threatening tariffs to bully other nations into cooperation with his policy goals, then retreating, then threatening again and sometimes actually imposing stiff levies, has unnerved investors, throwing the stock market into a period of volatility. Even after a mild rebound in the last two weeks, the S&P 500 is down 7% from its February highs.
Financial sector stocks have been among the hardest hit. Through early March, deal-making giants like Blackstone, KKR, Apollo and Carlyle had all fallen around 30% from their post-election highs, though they’ve since recovered some of those losses. Investment banks like Goldman Sachs and Morgan Stanley also declined around 20% from their record highs in February.
As for stocks that might get scooped up, in late November Forbes identified our own list of 18 attractive takeover targets based on analyst recommendations—on average, they’re down 8% this year, compared with a 3% drop for the S&P 500.
There are still pockets of activity, especially in large-scale deals, and transaction volumes in terms of the number of dollars spent don’t actually illustrate the same slump. Bolstered by a few megadeals, the cumulative amount spent on M&A in the U.S. so far this year is $416 billion, a slight uptick from $407 billion through March 24 of last year, according to Dealogic data. Constellation Energy announced a $16.4 billion deal to buy power producer Calpine in January.
On March 18, Google agreed to buy cybersecurity firm Wiz for $32 billion, its largest acquisition ever. The assumption is that the Trump Administration will be more favorably disposed to that deal than the Biden folks would have been. “You do see more amenability to consolidation, and it’ll be interesting to see what happens with Google and Wiz. That’s a big acquisition that wouldn’t have seen the light of day (under Biden),’’ says DeAngelo.
But Trump’s regulators may not be as business-friendly as buyers and sellers waiting out Biden’s term had initially hoped. Andrew Ferguson, who replaced Lina Khan, a lightning rod for conservative criticism, as chairman of the Federal Trade Commission, said in February that the Trump administration will continue to abide by 2023 guidelines developed by Biden’s Justice Department for reviewing antitrust cases. It’s a sign Trump may be more swayed by populist than corporate interests, though he’s delivered mixed messages and last week fired the FTC’s two remaining Democratic commissioners. (The pair filed suit on Thursday asking the court to declare their firings illegal.)
A report last week by The Capitol Forum suggested the Justice Department has competitive concerns about Capital One’s pending $35 billion takeover of Discover Financial, though the companies are still aiming to complete the deal by May. “There was a heavy discouragement (under Biden) of anything that remotely would affect the consumer. So bank mergers were pretty much dead on arrival,’’ DeAngelo observes.
Japanese firm Nippon Steel’s $14 billion bid to buy U.S. Steel, a deal blocked by Biden on national security grounds, also appears to remain on thin ice. “I don’t want U.S. Steel being owned by a foreign country,” Trump told reporters in February, echoing Biden, though he indicated he would be amenable to a minority investment.
Still, only a small fraction of deals get held up by foreign policy or antitrust concerns, and if interest rates do come down later in the year, buyout funds are bound to start feeling pressure from their investors to ramp activity up. Private equity funds are holding assets for an average of 6.7 years, above the average of 5.7 years over the last 20 years, according to McKinsey, creating a backlog that’s prolonging divestment periods for their funds. Plus, there are more than two million Baby Boomer small business owners who are nearing retirement and could be ready to sell to newly-raised funds.
“A lot of small business owners are getting to the age where they’re looking for exits,” says Jason Giles, an M&A attorney at Nyemaster. “It feels like more of a buyers’ market than it has in years past…Deals are harder to come by, so buyers have a little bit more leverage.”
While they may have more leverage, buyers have been hesitant to pull the trigger without clarity on which direction the market is going. The deal drought is also creating disparate price expectations between buyers and sellers—during quieter periods, without comparable recent deals, it can be harder to agree on multiples, bankers say.
“Nobody wants to be the first fool—there is a bit of a herd mentality in that space,” says Jay Novak, Houlihan Lokey’s global co-head of corporate finance with DeAngelo. “Nobody wants to be the guy that meaningfully overpaid for an underperforming asset out of the gate.”
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