US: A Beacon for Mergers and Acquisitions in 2025
The United States is emerging as a pivotal hub for mergers and acquisitions (M&A) activity this year, amidst a global uptick in dealmaking. With President Donald Trump’s pro-business policies and his ‘America First’ philosophy, US companies could see enhanced profitability, which might positively influence their valuations, according to experts in the field.
Potential Economic Impact
Economic uncertainty stemming from Trump’s tariffs and trade policies could, however, temper M&A enthusiasm as investors adopt a cautious stance. “If Trump’s strategies render US businesses more profitable, that will influence valuations, potentially yielding both positive and negative outcomes,” stated Rowan Bamford, President of Liberty Global Transaction Solutions (Liberty GTS), the M&A insurance division of Liberty Mutual.
Domestic vs. Global Sentiment
Trump’s policies could prove advantageous domestically if the rise in profitability surpasses the burden of borrowing, Bamford noted. Yet, the key lies in how these policies affect inflation and interest rates, as these elements will definitively shape market dynamics.
“Increased cash flow for businesses and improved consumer confidence are beneficial,” Bamford remarked. “However, elevated tariffs could increase the cost of goods, provoking inflation, which might lead to higher interest rates that eventually stifle deal activity.”
Focus on Domestic Deals
The US M&A market is characterized by its predominantly domestic nature. While global trends do exert some influence, the sentiment within the US is the principal driver. Trump’s ‘America First’ stance has further emphasized the market’s preference for domestic over cross-border transactions.
“Given that M&A activity in the US is largely domestic, a substantial influx of foreign investment seems unlikely,” Bamford explained.
Resurgence of Larger Deals
An undeniable factor in the resurgence of larger deals is the availability of borrowing. “Major deals typically require bank financing. Their return signals private equity’s belief that interest rates are stabilizing, making it an opportune time to secure loans,” Bamford stated. “Private equity firms rely on calculated decisions. Predictable borrowing costs inspire action.”
Accelerating M&A in 2025
Mergers and acquisitions in the US are set to accelerate in 2025, according to Liberty GTS, albeit not confined to any single sector. While technology and healthcare are expected to remain active, smaller deals across various industries will also contribute to growth.
Liberty GTS data indicates that although activity levels rose last year, the scale of deals was notably smaller. This burst of smaller deals likely resulted from pent-up demand after COVID-induced stagnation, Bamford observed. “These were transactions involving small to medium-sized enterprises (SMEs) or lower-value businesses, often owned by founders ready to sell and move on,” he stated.
Trends and Future Outlook
This wave of activity did not necessarily translate into significant profits for those facilitating the deals. Smaller transactions led to lower insurance limits. However, this trend shifted by the end of 2024, with larger deals re-emerging.
January and February witnessed slower M&A activity, Bamford noted, as the market grappled with the potential ramifications of Trump’s tariff threats. Yet, while aggressive US trade policies have sown uncertainty, they could potentially foster a more predictable environment for deal-making if their long-term effects become clearer.
The crux is predictability and medium-term economic stability, which are crucial for encouraging private equity investments. “Stability is the most critical factor for M&A activity,” Bamford emphasized. “When buyers and sellers can foresee the future, deals happen. In the absence of predictability, they don’t.”
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