The M&A Rebound That Wasn’t

In the critical world of mergers and acquisitions, the year started out so promisingly. After activity in the sector failed to live up to expectations in 2024, the New Year brought hope again, a chance for fortunes to change. But so far, it’s been more of the same disappointment.

Most prognosticators assumed that corporate leaders would jump into a slew of big deals once the new administration took office. Indeed, it looked like that would be the case: Six deals in excess of $10 billion were announced in November and December. But instead of opening, the floodgates have slammed shut since then. One bank recently slashed its 2025 estimates for mergers-and-acquisitions growth by nearly three-fourths. After initially expecting a 25% increase, it now only projects a 7% gain. In February alone, M&A activity fell 23% from a year prior. “There might have been too much euphoria at the beginning of the year,” says Ellen Boade, a principal in the Financial Officers and Board and CEO Services practices at Korn Ferry. By contrast, M&A activity in both Europe and Asia is up this year, by 12% and 59%, respectively, reflecting the unique challenges leaders face in the US.

To be sure, the trifecta of tariffs, interest rates, and inflation has caused the economy to stagnate and created uncertainty about the future. “The M&A market thrives on clarity and confidence,” says Jeff Constable, co-leader of the Global Financial Officers practice at Korn Ferry. Right now, Constable says, leaders have neither, so they are staying on the sidelines.

Whether this represents a pause—until there is more clarity around the level and length of tariffs—or a complete retreat will be determined over the next few months. Certainly, the money for M&A is there: S&P 500 firms are holding a record $3.8 trillion in cash. And the market has shown signs of life, such as a $32 billion technology deal announced in March. Smaller deals, or those with a valuation of less than $10 billion, are also on the rise this year. “Companies remain poised for dealmaking, but they are rethinking timing,” says Michael Eichenwald, co-head of the Consumer and Commercial Financial Services practice at Korn Ferry.

Boade agrees, noting that one byproduct of the economic uncertainty is that it has kept valuations in check. She says that this could create opportunities for firms with strong stock prices and large cash piles to solidify their market positions by picking off weaker rivals. Sectors like technology, healthcare, energy, and financial services are still seeing deals, for instance. “There is still a lot of pent-up demand,” says Boade, “and valuations are more reasonable now.”

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