M&A activity in 2024 increased considerably from 2023, which saw the lowest levels of deal activity in a decade. Our M&A outlook for 2025 suggests the potential for a banner year. Numerous variables could hinder deal activity, but improving economic conditions driven by lower interest rates and possible tax cuts, combined with the prospect for a more relaxed antitrust enforcement regime and other deregulation under the new administration, could create significant opportunities for strategic growth and investment.

Positive Factors for Dealmaking in 2025

• CEO Confidence and Stock Market Performance. CEO confidence post-election reportedly has increased, which can give c-suites and boards the necessary conviction to pursue M&A. If economic conditions improve, then capital markets should also strengthen. M&A volume frequently tracks stock market performance, and the S&P 500 just recorded its best consecutive years since 1997 and 1998. In addition, improved economic conditions and higher trading price multiples could narrow valuation gaps between buyers and sellers that were obstacles to some transactions last year.
• Antitrust Enforcement. Not since Grover Cleveland has a President lost a bid for reelection and then ran again successfully. Thus, while a change in Presidential administration and political party leadership ordinarily brings policy uncertainty, we can look to President Trump’s first term for some guidance – but no guarantees – as to how his administration may govern this time around. This is particularly the case with antitrust enforcement. Under the Biden administration and Federal Trade Commission Chair Lina Khan, there was a general view that the government would look skeptically on many tie-ups. Regulators successfully challenged several high-profile transactions in court, including the Jet Blue/Spirit and Kroger/Albertsons mergers. Over the next four years, we generally expect antitrust regulators to be more open to structural remedies and less likely to block mergers outright. But caution is warranted. We may see bipartisan scrutiny of certain industries like “big tech” and AI. There are also populist views in the Trump administration and Congress that may scrutinize major consolidations or mergers, particularly if they will impact US jobs or domestic manufacturing. The current expectation is also for the recently adopted HSR filing requirements to remain in effect.
• Lower Interest Rates. Acquisition financing should become more attractive if the Federal Reserve continues to lower or at least maintain its current interest rate target and moderate longer-term rates, which, in turn, should lower the cost of capital to purchasers (especially financial sponsors). It will be interesting to see whether private credit continues to play an increasing role in corporate financing if the cost of traditional bank debt goes down.
• Tax Policy. If Congress pursues tax cuts, the resulting savings could generate more cash flow to pursue acquisitions and make exit transactions even more attractive to selling shareholders. Another issue to watch is whether the Tax Cuts and Jobs Act, which expires at the end of 2025, is extended and/or modified.
• Push for Investment. The new administration has signaled a desire to attract significant investments in the U.S., which may be particularly beneficial for key industry segments like chip manufacturing, supply chains, and infrastructure manufacturing. This could be accomplished through various means, including new tax incentives. Some members of Congress have also signaled a willingness to implement a lending program to help return manufacturing jobs to the U.S.
• Deregulation. Dealmaking could be impacted if the new administration carries out its goal of deregulation, although it is not clear how quickly that impact might be felt. Deregulation is most likely to open M&A doors in the banking, fintech, crypto, and financial services industries.

While we expect a significant uptick in M&A activity across numerous industries and through a variety of transaction types, we may see particular volume from the following:

• Private Equity. It has been widely reported that many private equity sponsors need to sell portfolio companies in order to wind-up older funds and return profits to their investors. Exit transactions have been delayed for a variety of reasons, including valuation gaps and a dip in sponsor-to-sponsor M&A activity (largely due to the increased cost of capital associated with leveraged acquisitions caused by higher interest rates). Private equity should also be more common on the buyside than in 2024. There are large amounts of “dry powder” to be deployed, much of it raised from funds that closed several years ago.
• Strategic Divestments. Corporations will continue to explore divesting non-core assets and business lines to simplify their organizations and possibly to ward off threats from activist shareholders.
• Energy and Infrastructure. Energy and infrastructure will continue to be high priority areas for investment and growth. This will include deals focused on datacenters and broader acquisition strategies focused on meeting energy consumption forecasts in the U.S. and abroad.
• AI. As companies continue to assess competitive threats and opportunities from AI, we expect more investment activity in AI-based start-ups and AI-adjacent technologies and businesses. While some investors have expressed concern about overspending on AI initiatives, the fear of missing out on AI—which presents an existential risk to some companies—is likely to be a greater concern for many management teams and will thus drive M&A.
• Cybersecurity and Defense. Addressing risks of war, espionage, and terrorism will remain a critical area for governments and businesses. This will drive M&A as defense and cybersecurity firms seek to expand their capabilities. Certain areas of the defense industry are also uniquely positioned to see significant M&A, such as drones, AI-based military technologies, border security, and cyberwarfare.
• Media. The media industry may see an uptick in M&A as industry players evolve to navigate consumer trends, streaming options, and emerging technologies.

Countervailing Factors and Uncertainties

Of course, M&A activity in 2025 may fall short of expectations, particularly if economic conditions deteriorate. Various factors that could adversely impact M&A in 2025 include:

• Trade Wars / Tariffs. President Trump has made clear his goal to negotiate trade agreements and expressed his willingness to impose tariffs, which would necessarily impact M&A in affected industries as well as inbound/outbound investment involving certain countries. As with most government policies, tariffs invariably have winners and losers. To the extent tariffs allow businesses to raise prices, the higher returns could increase valuation, while other businesses will suffer if their supply chain falls apart or they are unable to pass along higher costs to consumers. There may also be bipartisan support for some tariffs, particularly in China.
• Politics. Uncertainty over important government policies could hold M&A back. There is the constant specter of disfunction in Washington, D.C., and thin Republican majorities in Congress. In addition, proposed cuts in government spending—perhaps led by the Department of Governmental Efficiency, or DOGE—could impact the economy. Staffing or other budget cuts at key governmental agencies (e.g., antitrust and banking regulators, SEC, and CFIUS) could also delay the ability to consummate M&A transactions.
• Near-Term Transition Issues. Compared to his first term, President Trump appears to be acting more quickly in naming key appointees. Nonetheless, the people who need to run important government various agencies must obtain Senate approval, where a successful confirmation is not guaranteed and there is a backlogged Senate calendar. Delayed appointments may also stall President Trump’s high-priority items such as border security and tax policy.
• Inflationary Pressures. Ongoing inflation will impact markets and economic conditions generally. There are also particular government policies under discussion (e.g., tariffs and immigration) that could contribute to inflationary pressures. Increased inflation may significantly affect the ability of the Federal Reserve to maintain or lower interest rates.
• State Attorneys General. A more business-friendly antitrust posture from the federal government could be offset by state attorneys general, particularly in the technology and healthcare industries and for large, consumer-facing businesses. This could be led by more localized concerns about competition or by state officials who see political upside in challenging transactions.
• Foreign Investment.
  • China. Consistent with the last four or more years, we expect significant challenges for inbound investments involving Chinese companies and investors due to national security concerns and CFIUS review of such transactions. In addition, the Department of Treasury’s outbound investment rules—which target only China at this point—became effective January 2, 2025. At a minimum, these new rules will impose additional diligence and other requirements on U.S. investors making investments, directly or indirectly, in certain economic sectors in China. Closing deals involving Chinese companies is currently and will remain daunting.
  • Other Countries. Insofar as countries other than China are concerned, we currently expect that CFIUS review under the second Trump administration will not be substantially different than it has been under the Biden administration. Comparing the first two years of the Biden administration (the only years for which data has been publicly reported) to the first two years of the first Trump administration, the clearance rates for transactions submitted to CFIUS were similar (around 70%). One wild-card is President Biden’s recent decision to block Nippon Steel from acquiring US Steel, which President Trump also supported blocking. Whether this signals a more protectionist turn by the U.S. government (or whether the prohibition was more a unique event related to electoral politics) remains to be seen. We note that Nippon Steel has filed a lawsuit challenging the decision.
• Geopolitical Risks. Numerous geopolitical risks could escalate in 2025, including the ongoing war in Ukraine, spread of war in the Middle East, Europe or elsewhere, acts of terrorism, sanctions, and the worsening of diplomatic and economic relations with certain countries, any of which could adversely affect markets.

Douglas S. Granger, James A. Kennedy, II, Austin Maloney, Eric R. Markus, Fernando Margarit, Uriel A. Mendieta, Valarie Ney, Richard Warren, Charles L. Brewer, Kevin Hahm, and Peter G. Weinstock also contributed to this article.