2025 primed for M&A 'perfect storm': Here's how your legal team can prepare
After the boom years at the beginning of this decade, the mergers and acquisitions (M&A) market abruptly hit the brakes in 2023, logging its slowest performance in over 10 years. And while the M&A environment reactivated slightly in 2024, rising 5% in the first half of the year compared to the first half of 2023, its recovery from last year's trough was slower than many observers anticipated.
2025 is all set tell a different story, however. With interest rates falling and record-breaking levels of private equity capital (or ‘dry powder’) waiting to be deployed, the stage is set for a major rebound. Adding fuel to this momentum is Donald Trump’s re-election, ushering in a regulatory and economic environment that could supercharge deal-making activity.
In this blog, we unpack the factors shaping this M&A "perfect storm" — from the prospect of relaxed antitrust enforcement to private equity’s resurgence — and explore how legal and compliance teams can gear up to seize the opportunities ahead. Whether you're a seasoned dealmaker or a business preparing for its first acquisition, it’s time to get deal-ready.
Read on for a look inside this perfect storm, and the ways in which your business can prepare.
Regulatory oversight expected to ease
In terms of federal oversight, the past four years have been marked by “aggressive merger enforcement and novel theories of harm to competition” in the words of Winston & Strawn, with agencies attempting to block deals like Meta’s acquisition of VR workout app Within.
Look for a different philosophy, and more flexibility, in the year ahead.
“The regulatory posture of the Federal Trade Commission [FTC] and the Department of Justice [DOJ] Antitrust Division that during the past four years challenged many proposed business combinations will likely be more relaxed under the incoming administration,” David Kostin, chief US equity strategist at Goldman Sachs Research, wrote in his team’s report.
“The DOJ and FTC will likely be more amenable to negotiating divestitures or other structural remedies as a condition to clearance, which the current administration has often declined to consider,” according to Winston & Strawn. “The Trump administration will probably also ease the agencies’ suspicion of private equity involvement in certain deals.”
Companies can also expect a less burdensome deal-making process — with shorter times-to-close than the 18-24 months often experienced under the Biden Administration. “For those of us doing M&A for a living, we’re quite happy about the potential changes,” said Ron Chapoorian with PwC.
Mitch Berlin, Vice Chair, EY (Americas’ Strategy and Transactions)
Tax reforms and lower interest rates will incentivize activity
Chapoorian also noted that Trump has proposed ending taxes on stock buybacks, one part of a wide-ranging set of tax proposals that are expected to leave corporations better-positioned for M&A expenditures.
These plans include a reduction in corporate income taxes from the 21% set during his first presidency and repatriation reform. The 2017 Tax Cuts and Jobs Act dropped domestic taxes closer to those available in popular international tax havens and complemented the change with exemptions for repatriated earnings. A second Trump Administration may seek to replicate this strategy in the years ahead, according to Christopher Granville with economic research firm TS Lombard.
The other important ingredient in this recipe: lower interest rates. So long as inflationary pressures remain low and the unemployment rate does not trend up too steeply, the Federal Reserve may continue lowering rates down toward 3%.
“It’s no secret that the M&A market declined in 2023 as the valuation gap between what buyers wanted to spend and what sellers wanted to charge for their companies kept many would-be deals from happening,” Bain & Co wrote in its analysis of that year’s activity.
Today, this valuation gap is closing “thanks to sellers’ falling price expectations and buyers’ rising ability to finance higher purchase prices as interest rates drop,” said PwC’s Chapoorian.
Private equity will reawaken
Another driver in this “perfect storm for M&A”: record levels of available capital, or ‘dry powder’, among private equity (PE) firms.
As PE exits dropped 44% year-over-year in 2023, this stagnation resulted in more than 2,000 PE-owned holding companies exceeding their intended golding periods and needing to be monetized — the highest number on record.
Furthermore, as FTC and DOJ leaders from the Biden administration are replaced by PE-friendly Trump appointees, firms are likely to make full use of the opportunity to “reignite their animal spirits,” in the words of investment management firm Neuberger Berman.
A caveat on cross-border deals
While many policies anticipated from the new administration will be favorable to mergers and acquisitions, a number of experts believe it is likely to prioritize policies favorable to domestic deals while hindering — or choosing not to remove barriers for — international investments.
The Foreign Investment Risk Review Modernization Act of 2018 gave the Committee on Foreign Investment in the United States (CFIUS) broader authority. “A Trump Administration is likely to continue utilizing CFIUS aggressively, particularly to scrutinize — and potentially mitigate or block — certain foreign investments in transactions that raise national security concerns,” international law firm Pillsbury Winthrop Shaw and Pittman wrote, noting heightened focus in areas such as semiconductors, supercomputers, and artificial intelligence, and renewable energy projects.
An overall philosophy of domestic protectionism might further impact the M&A landscape, with cross-border deals experiencing the negative impact. For instance, the drop to a 15% corporate tax rate may only affect domestic manufacturers, and Trump’s campaign promises include substantial new tariffs on all imports.
“If Trump prioritizes reducing dependency on foreign technology, it could lead to government incentives for American firms to acquire domestic tech startups to maintain innovation and security within the United States,” wrote international law firm Rooney Law. “While this may fuel deal flow within the US technology sector, it may discourage foreign players from pursuing acquisitions, limiting the pool of interested buyers and potentially impacting valuations.”
The M&A upshot: Chance favors the well-prepared team
As the new year unfolds, legal and compliance teams working at every scale — and across sectors — will find their leadership turning to them for due diligence, risk analysis, entity management and other fundamentals needed to bring the firm into deal-readiness.
The right tools and technologies accommodate this heightened pressure and responsibility and ease the scramble. Diligent Entities, for example:
- Provides a centralized corporate record of critical business information
- Creates a single secure and accessible corporate source of truth
- Leverages third-party integrations to get real-time corporate record updates from Workday, Oracle, Salesforce and more
- Supports regulatory compliance across global jurisdictions
Get ahead of 2025’s M&A opportunity
Download our 'Deal-Ready' guide today — a 10-step checklist showing how general counsels and legal teams can prepare themselves ahead of any mergers, acquisitions and divestitures.
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