It can feel at times like a parallel universe. No sooner are there headlines about war, inflation, fiscal risks and Fed independence than the latest US megadeal hits the wire.

Sanguine stock market progress is a backdrop to M&A’s soaring run. The S&P 500 has regained all Iran War-related losses and is back at highs. US M&A volumes year-to-date (YTD) of USD 788bn are up 43% year-on-year (YoY), according to Mergermarket data.

Just this week, we’ve seen Amazon’s USD 11.1bn swoop for satellite player Globalstar and the extraordinary, previously unthinkable, prospect of United Airlines and American Airlines combining.

“It’s the Wild West of deals,” one veteran M&A lawyer told Continental Drift.

A three-legged stool is keeping patrons upright in the mergers saloon: the Trump White House’s openness to larger combinations other administrations would have balked at; a scale-obsessed approach from boards determined to deliver growth in challenging times against the backdrop of AI dislocation; and a stable rates environment.

That latter leg might seem questionable in the face of inflationary pressures from President Trump’s Middle East militarism.

Indeed, while America has formidable domestic energy production capacity, some 8% of crude imports still come via the Persian Gulf – and marginal pricing affects the whole stack. If you need any proof of that, head to the nearest gas station.

Consumer prices climbed 3.3% in the 12 months to March 2026, from 2.4% in February. Yet set against this we have declining labor force growth, creating unemployment risks that counterbalance price hikes across the Federal Reserve’s dual mandate.

Labor force growth is “near zero”, which is “unprecedented in the United States’ recent history”, the Fed notes. This may not be great news for Main Street, nor for consumer confidence – but it does provide cover for the FOMC to hold rates steady, rather than flex up or down, as it rides out the controversy surrounding the end of Fed Chair Jay Powell’s term.

The market agrees. Futures pricing indicates a 63% probability rates will remain within the current 3.5%-3.75% range through to year-end, according to CME FedWatch.

This provides the stability that larger companies – particularly listed players with additional paper consideration levers – require to chase scale. Deal volume for transactions of more than USD 1bn stands at USD 674bn YTD, up 53% YoY.

Source: Mergermarket, data correct as of 16-Apr-26

Even as the IMF downgrades global GDP forecasts and genuine concerns about global stability mount, major corporate boards are in the grip of a “heads I win, tails you lose” dynamic when it comes to M&A.

If the war ends quickly and inflationary pressures ease, all is well; if geopolitical instability spills into the real economy, all the more reason to gain scale and resilience now, while Trump is still at his strongest – before midterm elections.

A rush ahead of November feels a bolted-on certainty. A Democrat-controlled Congress would bring a whole new realm of risk, with CEOs hauled before public hearings and associated media scrutiny set to raise the salience of trickier mergers.

Looking to the 2028 presidential election, it’s clear whoever emerges as the victor will not be as amenable to lobbying as the current dealmaker-in-chief. The antitrust enforcement environment is more open to lobbying than we’ve seen at any time in the postwar era

It may seem crude to suggest all parties need do is hire a MAGA-aligned executive and make the president happy, but any political risk advisor will tell you the same, just accompanied by a fat fee.

Countless dealmakers have remarked to Continental Drift just how strikingly easy it is under this administration to gain access to top White House officials – and even the president himself.

Yet a playbook that is clearly working well at the top of the food chain is less applicable in the mid-market. Indeed, volume for sub-USD 1bn deals of USD 123bn YTD is up just 4.7% YoY. This is just one indicator of how headline M&A figures obscure pain and frustration under the hood.

Nowhere is this truer than among mid-market focused financial sponsors.

Having kicked off the year hoping cheaper financing might smooth exits, that ship sailed and progress has in fact proven relatively muted.

Sponsor exit volumes YTD of USD 95bn have fallen 37.8% YoY. Though coming with the caveat that relatively few lower mid-market deals bear disclosed values, it’s notable that the haul of exits below USD 500m is just USD 2.49bn – the second smallest in a decade.

Against this, the desperation to deliver DPI no matter the cost is reflected in the uptick in deal numbers to 220 (up 5.3% YoY), even as volumes tank.

Source: Mergermarket, data correct as of 16-Apr-26

The biggest impact of geopolitical turmoil in private equity-related dealmaking has been on determining valuations. Buyers seek discounts, while sellers point to calm equity markets to insist turmoil should be looked through.

Yet it’s precisely mid-market firms most feeling the pinch, squeezed not only by energy cost hikes and the prospect of supply chain concerns akin to those experienced post-pandemic – but also by the pricing pressure coming from larger corporations within their client base.

And as we’ve seen, those players are scaling. Fast.

Sponsors have some tough decisions to make on whether fund term expirations allow them to kick the can on assets giving them valuation headaches, particularly in the SaaS space.

Where LPs are amenable, a continuation vehicle (CV) might serve as a solution if bids are shy of GPs’ and their investors’ convictions. TowerBrook’s decision to place accounting player EisnerAmpner into a single-asset CV came after it ran a parallel process engaging with sponsors for a sale.

Failing that, GPs may need to bite the bullet, accept the realities of multiple compression, and realize DPI at the price they can get.

For large-cap corporations, the message is clearer: saddle up and build your dealmaking posse – before there’s a new sheriff in town.