• Tariffs trigger volatility, slow down dealmaking in US
• Ample capital available, but conviction in short supply
• With limited exits, venture capital industry is in peril

The mergers and acquisitions landscape in North America is facing a period of pause rather than paralysis, shaped by persistent economic uncertainty, liquidity pressures in the private markets, and shifting dynamics in cross-border investments, a group of bankers said this week.

In early 2025, US M&A activity has slowed considerably as global trade tensions and the fickle nature of government policies are causing companies to delay decisions, according to the bankers, speaking at the Milken Institute Global Conference in Beverly Hills, California.

President Trump’s tariff announcement in early April, on what he termed “Liberation Day”, brought widespread uncertainty to the global economy and set off acute volatility in the US stock market, bankers noted in a panel titled “M&A Metamorphosis: How Private Capital and Tech are Reshaping Financial Markets.”

While private equity firms and corporations are sitting on vast amounts of dry powder, it is difficult for them to conduct financial modeling with so much disruption to global market dynamics.

Recession fears in the US are also leading to more conservative financial forecasting, complicating large-scale acquisition planning, according to the conference panelists.

Going private 

Deals are still being signed, nonetheless. Sycamore Partners, a private equity firm, recently agreed to buy pharmacy chain Walgreens Boots Alliance for USD 10bn, while private equity firm 3G Capital announced this week it will be taking footwear maker Skechers private for USD 9.42bn.

Those two agreements required “some conviction, some courage, and some creativity,” said Anu Aiyengar, global head of M&A at JP Morgan, which held advisory roles on both transactions.

More take-privates are expected, she added, as public companies with market capitalizations below USD 5bn are constrained by quarterly performance pressures and lack the scale to absorb uncertainty.

Another case in point: Private equity group TPG said this week it is taking financial technology provider AvidXchange private in a deal valued at USD 2.2bn. TPG will become AvidXchange’s majority owner while payments firm Corpay will take a 33% stake.

Still, those transactions are the exception, not the norm.

Vanessa Dager, head of North American M&A for BNP Paribas, said many deal discussions have been paused as buyers and sellers wait to see if conditions improve this summer.

There is plenty of capital available, but conviction is in short supply, Dager noted.

Jason Greenberg, global head of technology, media and telecom investment banking at Jefferies Financial Group, said he is “cautiously optimistic” M&A activity can pick up in the second half of this year.

Financial markets have mostly recovered from the initial shock of the tariff threats, spreads in debt markets are narrowing, and the CBOE Volatility Index has dropped to much lower levels in recent weeks, he observed.

Liquidity logjam 

But with a mismatch in valuation expectations between buyers and sellers hindering transactions over the last few years, even before the recent market challenges, the venture capital industry is facing a liquidity problem, according to Aly Alibhai, head of M&A in North America for Deutsche Bank.

The lack of viable exit paths — whether through initial public offerings or M&A — has led to mounting pressure from limited partners (LPs) who have seen little capital returned. If current trends continue, with only 6% of net asset value distributed in 2024, Alibhai warned that the venture model itself may be at risk. “Right now, the venture industry is broken,” he said. Without functioning exit pathways, the whole investment lifecycle gets clogged, said Alibhai.

Private equity firms are also under pressure, he added. Following a decade of robust growth in private equity, assets under management are starting to plateau, according to the banker.

General partners (GPs) are increasingly turning to interim solutions like continuation funds and net asset value (NAV) loans, but these measures have failed to meet the liquidity demands of institutional LPs such as pension funds and endowments. As public markets remain selective and private exits stall, the traditional three-to-five-year private equity timeline is breaking down, he said.

The imbalance has shifted LP sentiment toward established firms with consistent performance, sidelining emerging managers and creating a concentrated capital environment, the panelists noted.

Amid this uncertainty, a possible silver lining is emerging in the form of transatlantic investment driven by the global boom in artificial intelligence. US capital is increasingly eyeing overseas technology and infrastructure, aiming to close funding gaps that have historically hindered digital growth on other continents. Europe’s lag behind the US in AI investment has created fertile ground for American investors — if political headwinds can be managed, the bankers said.

Regulatory unpredictability in the US and in Europe is also raising the bar for transactions.

Today, there are 35 deals over the size of USD 1bn totaling roughly USD 400bn in deal value, pending approval by regulators, according to Aiyengar. Some deals are in litigation.

Dealmakers are not asking for a complete overhaul of the global regulatory framework, she added. Rather, they simply need more regulatory clarity so they can advance their deals, Aiyengar said.

Keeping perspective  

The volume of announced US M&A is off to its slowest start in two years, as measured in dollar value, which slipped 5.7% this year through April to USD 586.5m when compared with the same period in 2024, according to Dealogic.

While US dealmaking is in decline, activity in other countries is notably better, added Alibhai.

Deal volume outside of the US posted its best year-to-date result since 2022, climbing 43% in dollar value through April to USD 702m.

Though deal values are up outside of the US, the number of M&A transactions is down year to date. April was especially slow.

Geopolitical tensions and rising protectionism are casting shadows over cross-border deals, particularly those involving US targets, as international players reassess their risk exposure, according to the bankers.

US firms, meanwhile, are focusing on internal resilience — shifting their strategies to prioritize operational efficiency, the integration of AI, and supply chain reengineering, the bankers said.

Despite the hurdles, strategic interest remains high, particularly in AI, data centers, and other innovation-focused sectors where investors are eager to put their capital to work, they said.

Activist investors also continue to shape M&A activity.

Once seen primarily as US-based actors, activists are now exerting influence in Japan, Australia, and across Europe, according to the bankers. Their strategies have evolved, often focusing on longer-term value creation rather than quick-turnaround takeovers. Companies don’t want to proactively put themselves up for sale in this market unless there is buyer demand.

“You don’t want to throw a party until you know someone is going to show up,” said Aiyengar.

Ultimately, this year appears to be a year of recalibration rather than retreat, according to the bankers. While M&A activity is restrained by macroeconomic and political volatility, the fundamentals of capital availability and strategic need remain intact, they said.