M&A Forecast for 2025 After Tariff Changes

Following our previous report on the M&A outlook for 2025, which highlighted several positive factors such as the significant amount of available capital, monetary conditions, lower interest rates, and a favorable U.S. government stance, the landscape has shifted due to global tariffs introduced by the U.S. government in April. These tariffs have caused uncertainty in the market, affecting future dealmaking prospects.

The imposition of tariffs has led to a cautious approach by companies towards making large investments like M&A deals. The unpredictable nature of trade policies and the resultant increase in costs of goods have impacted the profitability of companies. This, in turn, has made potential acquisitions less appealing due to diminished financial performance. Moreover, global supply chains have been disrupted, causing delays and cost escalation, affecting companies relying on international suppliers and decreasing their desirability as acquisition targets.

Furthermore, lending conditions have been altered by the tariffs, influencing market volatility and consumer confidence. While the loan market witnessed favorable conditions at the beginning of the year, with low spreads and borrower-friendly terms, subsequent capital market fluctuations have increased costs for riskier borrowers, leading to reduced borrowing activity and affecting overall dealmaking.

Economic indicators suggest a shift towards caution in the latter half of 2025. The CFO Council survey by CNBC shows a substantial increase in the number of CFOs anticipating a recession, from 7% to 60%. Key economic benchmarks like West Texas Intermediate (WTI) crude oil prices have declined, reflecting a change in market sentiment from optimism at the dawn of a new administration to a more guarded perspective. Markets are adjusting to policy changes, with concerns about potential stagflationary effects delaying immediate benefits.

Amidst these developments, we forecast a flat to negative trend in M&A activity, volume, and value for the remainder of 2025. Navigating the evolving M&A landscape requires expert advice. For tailored insights on how these shifts might impact your business strategy, contact us today.

In conclusion, while the M&A landscape showed promise earlier in the year, the introduction of tariffs and ensuing market uncertainties have dampened future prospects. Companies need to adapt to these changing conditions and seek specialized guidance to navigate these challenges effectively.