M&A activity slows as tariffs and uncertainty weigh on deals
Mergers and acquisitions (M&A) activity in the first quarter of 2025 fell short of expectations, as increasing economic uncertainty and a rise in global trade tensions caused many companies to pause and reassess their positions.
The optimism that surrounded the start of the year, especially following signs of economic stability—thanks to falling inflation, interest rates, and positive valuations—has quickly diminished.
Companies, particularly in North America, Europe, and Asia, are proceeding with caution, leading to a significant reduction in completed deals.
Daniel Friedman, global leader of transactions and integrations at Boston Consulting Group (BCG), noted that despite a positive economic outlook in late 2024, the dip in deal-making activity was expected.
“The recent dip has been driven by weaker equity markets and rising policy uncertainty, and it’s clear that’s making many companies more hesitant to pursue deals aggressively,” Friedman said.
The statistics bear out this caution. The number of completed deals worth $100 million or more fell sharply across key regions.
In North America, 91 deals were completed in Q4 2024, but that number dropped to just 80 in Q1 2025. Europe and Asia saw similar drops, from 42 to 29 and 61 to 44, respectively, according to Willis Towers Watson’s Quarterly Deal Performance Monitor.
The slowdown in M&A activity is being driven by rising risks in both the equity markets and geopolitical sphere. The introduction of broad new tariffs in the U.S., along with escalating geopolitical tensions, have dampened deal-making enthusiasm.
David Dean, managing director of M&A consulting at Willis Towers Watson, stated that the uncertainties surrounding tariffs and geopolitical instability are making boardrooms cautious.
“Boardrooms are likely to put deals on hold as they assess the implications for their operations, adopting a cautious approach until the situation becomes clearer,” he said.
While the specific tariff levels and their duration remain uncertain, the global regulatory environment is expected to continue driving caution. The broader economic and political motivations behind these tariffs further complicate the decision-making process for CFOs and executives involved in potential mergers or acquisitions.
Despite the cautious climate, there is still optimism in certain areas of the M&A landscape. Private equity firms are sitting on a significant amount of capital, with many ready to move forward once clarity around political and regulatory issues emerges.
“As we get more clarity—especially around political direction and regulatory signals—I’d expect companies and funds that have been sitting on the sidelines to move more decisively,” Friedman said.
This cautious optimism is reflected in the performance of companies that did complete M&A deals in Q1 2025. Unlike previous quarters, the shares of acquiring companies outperformed broader equity markets.
For the first time in seven quarters, companies that closed M&A deals worth over $100 million saw positive results, with shares outperforming the MSCI World Index by an average of 1.5 percentage points.
There were notable regional differences in how acquirers performed. In Europe, companies that completed deals saw remarkable success, outperforming their regional index by 16 percentage points. Similarly, Asia-Pacific buyers outperformed their regional index by 5.8 percentage points.
North America, however, saw a contrasting trend, with acquirers underperforming their regional index by 2.2 percentage points. This marks the ninth consecutive quarter of negative performance in North America, suggesting that while private equity and strategic buyers remain active, they may be more cautious in their investments.
The first quarter’s M&A activity has revealed that while economic fundamentals remain positive, the backdrop of geopolitical and policy uncertainties is holding back deal-making enthusiasm.
With trade tensions and the ongoing risk of tariff imposition, many companies are waiting for a clearer picture before diving into new mergers or acquisitions.
However, those who have proceeded with deals in 2025 have seen positive results, particularly in Europe, raising hopes that M&A activity could rebound as the global political and economic landscape becomes clearer.