Mergers and acquisitions activity got off to a slower than expected start in the first quarter of 2025, with companies pausing to assess increasing economic uncertainty.
It was a rather quick turnaround in sentiment, as the beginning of the year had brought optimism that the pace of dealmaking would pick up.
Even aside from President Trump’s November election, which many companies and CFOs in the United States believed would have a positive impact on business generally, the economic ingredients for a surge in deals appeared to be in place.
Fundamentals like inflation, interest rates and valuations were moving in the right direction and in fact had been doing so during much of 2024, noted Daniel Friedman, global leader of transactions and integrations for Boston Consulting Group (BCG).
Instead, the already-sluggish level of M&A activity dipped even further in the first quarter, and it was a worldwide trend. The number of completed transactions worth at least $100 million, compared with the fourth quarter of 2024, fell from 91 to 80 in North America, from 42 to 29 in Europe, and from 61 to 44 in Asia, according to Willis Towers Watson’s Quarterly Deal Performance Monitor.
“The recent dip has been driven by weaker equity markets and rising policy uncertainty, and it’s clear that’s making many companies more hesitant to pursue deals aggressively,” said Friedman.
And the present outlook for completing deals, at least for the time being, doesn’t look any better.
“The introduction of broad new U.S. tariffs, coupled with geopolitical instability, is expected to dampen the M&A landscape in the near future,” said David Dean, managing director of M&A Consulting for Willis Towers Watson. “Boardrooms are likely to put deals on hold as they assess the implications for their operations, adopting a cautious approach until the situation becomes clearer.”
At present, it’s not clear what levels the tariffs will ultimately settle at — if they settle at all — or how long they will last. In fact, even the motivations for them may be uncertain enough to influence companies toward standby mode.
Speaking with CFO.com, Dean suggested that in order to make good M&A decisions, executives would benefit from knowing whether the main goal is, for example, bringing manufacturing jobs to the U.S., negotiating new deals with countries, or something else.
Some perspective may be in order, however. Friedman pointed out that private equity has a lot of dry powder, and strategic buyers are looking to deploy capital. “As we get more clarity — especially around political direction and regulatory signals — I’d expect companies and funds that have been sitting on the sidelines to move more decisively,” he said.
Meanwhile, there was one positive M&A trend in the first quarter: Deals finally generated positive results for shareholders. It marked the end of a seven-quarter dry spell for acquiring companies, whose shares had underperformed the broad equities market since late 2022.
Based on share-price performance, companies that completed M&A deals valued over $100 million in this year’s first quarter outperformed the wider market by a global average of 1.5 percentage points, according to Willis Towers Watson’s research.
The quarterly analysis measures share-price performance as a percentage change in share price from six months before a deal’s announcement date to the end of the quarter in which the deal was completed, relative to the MSCI World Index and regional MSCI indices.
European acquirers outperformed their regional index by a startling 16.0 percentage points during the first quarter. Asia-Pacific buyers were 5.8 percentage points above their regional index.
Dealmakers in North America, by contrast, underperformed their regional index by 2.2 percentage points — the ninth successive quarter of negative performance in the region.
