US M&A Suffers Worst Start in a Decade: Policy Volatility Stalls Dealmaking

The US M&A market has kicked off 2025 with its weakest performance in a decade, reflecting the chilling effect of policy unpredictability under Donald Trump’s administration. According to LSEG data, the number of US mergers and acquisitions (M&A) dropped nearly 30% in January YoY, while the total deal value fell by 18%. Market confidence, which had initially surged post-election on expectations of deregulation and business-friendly policies, has since been eroded by erratic policy shifts, trade conflicts, and rising interest rate concerns.

Uncertainty and Deal Flow: The Core Issue

The sharp downturn in deal activity underscores the heightened risk perception stemming from Trump’s trade rhetoric and interventionist economic stance. Investors and corporate executives have been rattled by the administration’s proposed tariffs on key trading partners, including Mexico and Canada, which threaten to disrupt supply chains and increase input costs. Additionally, Trump’s populist policies could stall regulatory approvals for major deals, further compounding M&A hesitancy.

From a financing perspective, Federal Reserve signals to keep interest rates elevated have added another layer of complexity. Higher borrowing costs directly impact leveraged buyouts (LBOs) and private equity (PE) dealmaking, where favourable debt conditions are a prerequisite for robust transaction volumes. Given these headwinds, firms are adopting a "wait-and-see" approach, postponing deals until market conditions stabilise.

Sectoral Impact: Energy and IPO Market Take a Hit

The uncertainty has had a pronounced impact on the energy sector, particularly in renewables. Trump's scepticism toward green energy and the rollback of wind energy permits have significantly curtailed deal flow in this space. This policy shift has made it difficult for infrastructure funds to commit capital to long-term projects, further hampering investment sentiment.

The IPO market has also stumbled out of the gate in 2025. The much-anticipated listing of Venture Global, a major US natural gas exporter, was expected to be a flagship offering but priced at an equity value of $68bn—40% lower than initial projections. The stock has since fallen by 20%, illustrating the broader weakness in capital markets and investor wariness in the face of political and economic turbulence.

MY OUTLOOK: M&A Activity Hinges on Policy Stability

In my view, while Trump’s administration theoretically favours deregulation and a pro-business climate, the erratic nature of policymaking has created more uncertainty than opportunity. The volatility surrounding tariffs, regulatory oversight, and the broader economic outlook makes it difficult for dealmakers to structure transactions confidently.

For M&A to regain momentum, corporate leaders need clarity on trade agreements, regulatory policies, and interest rate trajectories. Without this, deal volumes may remain suppressed, and valuation gaps between buyers and sellers will persist, further complicating negotiations. However, as seen in previous cycles, once policy direction stabilises, pent-up demand could trigger a rebound later in the year.

Conclusion: A Fragile Market in Need of Direction

The US M&A market’s sluggish start is not merely cyclical but symptomatic of deeper structural concerns surrounding policy coherence. If Trump’s administration can provide clear, consistent, and market-friendly signals, we could see a re-acceleration of deal activity. However, if uncertainty lingers, 2025 could remain a year of muted M&A, with only the most resilient and strategic deals moving forward.

For investors and firms, agility and rigorous due diligence will be paramount in navigating this volatile landscape. Dealmaking is still possible, but timing, structure, and risk mitigation strategies will be more critical than ever before.