Key takeaways:
- Dealmakers are expecting M&A activity to pick up later in 2025.
- The accumulation of private equity capital is expected to drive increased deal and exit activity.
- Acquiring AI capabilities through M&A is challenging due to market gaps and regulations. Alternative strategies include partnerships and minority stakes.
In light of unforeseen market fluctuations and geopolitical challenges, typically optimistic dealmakers are adopting a more guarded outlook for the upcoming weeks and months. However, they remain confident that the pace of mergers and acquisitions will accelerate later in 2025.
Let’s explore the factors that look to shape M&A activity in 2025.
Shifting expectations for 2025
The global M&A market is poised for growth in 2025. This cautiously optimistic outlook is driven by lower interest rates in Europe, the resolution of key national elections, and robust equity market performance. Furthermore, companies continue to face the imperative to adapt strategically and pursue expansion.
However, the introduction of tariffs by the Trump administration has raised uncertainty among business leaders, boards, and stakeholders seeking to plan and negotiate M&A activity.
Some companies remain steadfast and eager to leverage private equity, while CEOs remain bullish about a moderately positive outlook for an uptick in deal activity in 2025.
One dealmaker told Reuters: " We are busy ... It's hard to see the year ending on a slow note."
Regulatory changes and strategic considerations
The Trump administration was initially expected to adopt a more relaxed approach to M&A enforcement by federal antitrust agencies. However, The White House is anticipated to uphold the Biden administration's strong approach to antitrust enforcement in labor markets. Recent statements from Andrew Ferguson, the new FTC Chairman, along with Mark Meador, President Trump’s nominee for the remaining seat on the five-member commission, suggest that the Ferguson-led FTC will keep focusing on initiatives that safeguard workers. This may include enforcing rules against noncompete, no-poach, and non-solicitation agreements, as well as taking labor concerns into account during merger reviews.
Gail Slater has been appointed as the Assistant Attorney General for the Antitrust Division. Under her leadership, the Department of Justice is anticipated to maintain a vigorous approach to antitrust enforcement, focusing on both civil conduct and merger activities. During her confirmation hearing , Slater said that this administration will continue to focus on “the importance of protecting workers, the risks sometimes presented by vertical mergers and dominant firm acquisitions of nascent competitors, and the critical need to prevent the monopolization of digital markets.”
Unlike the previous administration, the current leaders of the antitrust agencies are likely to focus enforcement through investigations rather than broader regulatory measures.
Considering her previous work in policy related to antitrust issues in emerging technologies and artificial intelligence, Slater will likely pay close attention to Big Tech and various competition-related concerns. She has also voiced support for the White House’s apprehensions regarding Big Tech and platform moderation.
Slater shows no indications of revising the 2023 Merger Guidelines or reducing the expanded HSR filing requirements in the near future. Agreeing with FTC Chairman Ferguson, Slater agreed that “current merger guidelines simply restate longstanding law” and she indicated that she will use the 2023 Merger Guidelines to review mergers at the DOJ. Additionally, AAG Slater has not expressed concern about the burden from the new pre-merger filing requirements, which went into effect on February 10, 2025.
Companies may face less burden in deals where a structural remedy can address competitive concerns. Slater advocates for “effective and robust structural remedies” in merger investigations. With Slater's approach, the DOJ is likely to be more receptive to settlements in merger cases where these remedies can be implemented without placing excessive demands on the resources of the Antitrust Division. This shift from the previous administration may result in more pro-competitive deals being approved without lengthy review processes or federal litigation.
Private equity
A lengthy decline in deal activity has resulted in a significant accumulation of private equity capital, often referred to as "dry powder." Many private equity funds are now under pressure to sell off older investments – some retained for over the standard three-to-five-year timeframe – to return capital to their investors. Concurrently, many companies are realigning their focus on core operations and beginning to sell off non-core assets.
Whether momentum can build in 2025 will largely depend on macroeconomic conditions and policy decisions. The industry is eager to make deals, but the early slowdown in global M&A activity this year suggests that uncertainty will continue to keep markets on edge. With inflation and interest rates fluctuating, investors are seeking clarity amid conflicting signals regarding tariffs and other macroeconomic issues.
