Deal Volume and Expectations for 2025
The U.S. M&A market heading into 2025 was expected to strengthen as key bottlenecks – namely monetary policy uncertainty and regulatory scrutiny abated. According to Goldman Sachs’ 2025 M&A Outlook, stabilizing capital markets, a rebound in CEO confidence, and the need for strategic growth and capability enhancement were expected to fuel an increase in M&A deal activity. Despite macroeconomic risks – including tariff-related uncertainty and ongoing geopolitical tensions – Goldman Sachs projected that corporate portfolio reshuffling, private equity dry powder deployment, and a wave of AI-driven technology acquisitions would help sustain an active M&A environment.
In a November 2024 forecast, EY-Parthenon projected total U.S. M&A deal volume to rise by 10% in 2025, following a 13% increase in 2024. Similarly, a January 2025 survey conducted by the Alliance of Merger & Acquisition Advisors (AM&AA) of 173 investment bankers, brokers, family offices, private equity firms, and other finance-related organizations indicated expectations for higher M&A activity this year. However, U.S. M&A activity slowed in the first quarter, with trailing twelve months through March 2025 showing a 10.3% decline in closed deal volume but an 11.6% rise in total closed deal value, primarily driven by high valuations from mega deals.
U.S. M&A Closed Deal Volume Drops 10% but Value Increases 12% YoY
| Number of Deals – 12 Months Ended | |||
|---|---|---|---|
| Deal Size | 3/31/2025 | 3/31/2024 | Change |
| $1 Billion + | 386 | 308 | 25.3% |
| $500MM to $999.9MM | 240 | 216 | 11.1% |
| $250MM to $499.9MM | 267 | 263 | 1.5% |
| $100MM to $249.9MM | 436 | 404 | 7.9% |
| $50MM to $99.9MM | 389 | 353 | 10.2% |
| $25MM to $49.9MM | 384 | 379 | 1.3% |
| $10MM to $24.9MM | 440 | 470 | -6.4% |
| Under $10MM | 1,085 | 1,176 | -7.7% |
| Undisclosed | 10,032 | 11,655 | -13.9% |
| Total | 13,659 | 15,224 | -10.3% |
| Agg Transaction Value ($Bn) – 12 Months Ended | |||
|---|---|---|---|
| Deal Size | 3/31/2025 | 3/31/2024 | Change |
| $1 Billion + | $1,508.1 | $1,339.9 | 12.5% |
| $500MM to $999.9MM | $169.1 | $151.5 | 11.6% |
| $250MM to $499.9MM | $93.6 | $91.7 | 2.1% |
| $100MM to $249.9MM | $70.4 | $63.8 | 10.3% |
| $50MM to $99.9MM | $27.9 | $24.6 | 13.4% |
| $25MM to $49.9MM | $13.8 | $13.4 | 3.0% |
| $10MM to $24.9MM | $7.1 | $7.8 | -8.2% |
| Under $10MM | $3.2 | $3.5 | -9.7% |
| Undisclosed | N/A | N/A | N/A |
| Total | $1,893.2 | $1,696.2 | 11.6% |
Buyer Hesitation results in More Conservative Terms: Q1 2025’s Cautious M&A Landscape
Turning our attention to Q1 2025, according to LSEG’s Global M&A Review, U.S. announced (versus closed) M&A deal value totaled $386.2 billion in Q1 2025, representing a 14% decline compared to Q1 2024, marking the slowest opening quarter for announced U.S. dealmaking in two years.
Deal structuring in the U.S. M&A market during Q1 2025 reflected a more conservative approach than in prior years. In 2025, all-cash transactions remained less common, with buyers reluctant to shoulder full risk given financing costs and market uncertainty. Instead, structures featuring a 70-80% cash component, supplemented by seller financing instruments such as promissory notes, rollover equity, and earnouts, becoming more prevalent.
Drivers of M&A Activity in Q1
Despite broader market headwinds, several key factors drove M&A activity in Q1 2025:
- Private Equity Dry Powder Deployment – Private equity firms, backed by record levels of available capital, remained active acquirers, as the overall share of financial sponsor activity increased even as total deal value decreased.
- Technological Transformation and AI Adoption – Demand for digital capabilities and AI-driven innovation fueled acquisitions across Technology, Healthcare, and Industrial sectors.
- Cross-Border Activity – Cross-border M&A rose 40% globally, led by Technology, Industrials and Materials sectors as companies sought geographic diversification.
Valuation Trends
U.S. M&A valuation multiples remained relatively stable in the first quarter 2025 despite a slowdown in overall deal activity. The global average multiple rose slightly to 13.1x, compared to 12.8x during the same period in 2024.
Global valuation trends serve as a strong proxy for the U.S. market, as the U.S. accounted for 43% of global M&A activity, meaning that U.S. deal pricing heavily influences – and is influenced by – global averages. Furthermore, sectors that traditionally command higher multiples, such as Technology, Healthcare, and Financials, represented a large share of U.S. M&A activity in Q1.
Industries with the Most Activity
In the first quarter of 2025, Technology, Financials, and Energy & Power led U.S. M&A activity by total deal value. According to LSEG’s Q1 2025 Global M&A Review, Technology transactions accounted for the largest share of U.S. dealmaking, totaling $113.5 billion, driven by sustained demand for AI infrastructure, cybersecurity, and cloud services. Financials followed closely, with activity reaching $84.6 billion, supported by ongoing consolidation among banks, insurance companies, and fintech platforms. Energy & Power also remained a significant contributor, generating $74.2 billion in deal value, although volumes moderated compared to prior years amid shifting energy policies and commodity price volatility. Healthcare, Industrials, and Materials sectors also contributed meaningfully to overall M&A volumes, reflecting broader corporate strategies around operational efficiencies and supply chain resilience. Notably, Industrial sector transactions were fueled by interest in automation technologies and infrastructure modernization initiatives.
Buyer Breakdown
The U.S. M&A buyer landscape in the first quarter of 2025 remained diverse but selective. Private equity firms remained active participants, accounting for just north of 25% of U.S. M&A deal value. Elevated dry powder levels and the need to deploy capital efficiently drove steady sponsor-backed activity despite tighter financing conditions.
Strategic buyers, particularly those in Technology, Healthcare, and Financial Services, remained focused on acquisitions that could bolster growth, technological capabilities, and operational resilience. Corporate acquirers showed heightened caution, prioritizing targets with predictable cash flows and defensible market positions amid macroeconomic uncertainty.
Geopolitical and Economic Influences
Geopolitical and economic factors significantly influence the M&A environment, and recent tariff announcements have introduced uncertainty. The 10% baseline tariff on all imports, with higher rates for other countries such as China, has raised concerns about valuation fluctuations and financing terms, especially for globally reliant firms. In Q1 2025, U.S. stock markets posted notable losses. The S&P 500 declined by approximately 4.6%, the Nasdaq Composite dropped around 10.4%, and the Dow Jones Industrial Average slipped 1.3%.
Despite initial expectations of looser antitrust enforcement under the Trump administration, the decision to retain strict merger review guidelines has dampened the anticipated surge in M&A activity. “In February 2025, the Trump administration made a notable decision to retain the merger guidelines established in 2023 under the Biden administration. This move, detailed in memos from FTC Chair Andrew Ferguson and DOJ acting head Omeed Assefi, keeps a stricter framework for reviewing corporate mergers, surprising many who expected a more business-friendly approach.”
The Federal Reserve’s interest rate policies are crucial in shaping the M&A landscape. The Fed’s policy is crucial to M&A because lower interest rates can facilitate deal financing. The Federal Reserve’s March meeting led to no change in the Fed Funds Rate, which was 97% expected. When looking through December, the CME Group is now projecting the Fed Funds Rate to be 350-375 with a leading 34.0% probability. This suggests the Fed will cut rates 3 times by 25bp each.
M&A Market Outlook
Despite a stronger 2024, U.S. M&A activity now has a slightly more cautious tone in select industries, reflecting growing concerns around tariffs, trade policies, inflation, and financing conditions. Dealmakers remain selective, particularly in the mid-market, as high borrowing costs and policy uncertainty weigh on confidence.
Private equity remains a key contributor to deal volume, expected to rise 16% in 2025. Firms adapt by shifting away from traditional leveraged buyouts in favor of smaller, bolt-on acquisitions and strategic partnerships, enabling faster integration and lower capital risk. Corporate M&A activity is forecasted to increase by 8%.
Overall, the market remains cautiously optimistic for 2025. Deal volume is expected to improve as the year progresses, contingent on easing interest rates, regulatory clarity, and increased CEO confidence. According to EY’s March 2025 outlook, a return to higher deal activity is likely once economic headwinds begin to subside and cost of capital conditions become more favorable.
References
- Goldman Sachs, 2025 M&A Outlook
- EY-Parthenon Deal Barometer – November 2024
- Alliance of Merger & Acquisition Advisors (AM&AA) – January 2025
- LSEG Global M&A Review, First Quarter 2025
- SGB Media, EY M&A Outlook – March 2025
- FactSet Flashwire US Monthly – April 2025