It’s a slow start to the year for M&A so far as uncertainty takes hold

Wall Street’s hopes for a post-election resurgence in M&A activity have dialed down, with global transaction volumes reaching just USD 590 mn through 25 March — only slightly ahead of last year, according to Bloomberg Intelligence data. The bump is mostly thanks to a handful of outsized transactions, including Alphabet’s USD 32 bn takeover of cybersecurity firm Wiz and a USD 6+ bn agreement for the Boston Celtics. So far, only seven transactions valued above USD 10 mn have been announced — half as many as this time in 2024. This is despite expectations of a better year for M&A from the likes of EY and Bain.

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Policy turbulence is hurting confidence: While Trump campaigned on deregulation and tax cuts, his early months in office have instead brought market volatility, a stock market correction, and renewed inflation fears. “You print a board book for a meeting one day, and by the time the meeting happens the next day things have shifted in a different direction,” said Paul Weiss, M&A partner Jim Langston.

ICYMI- US inflation climbed 0.3% last month and 0.4% in January, well above the Fed’s 2% target. Trump-era trade measures — including 25% duties on steel and aluminum and looming reciprocal tariffs — threaten to push prices higher, further complicating Fed rate-cut bets.

Regulators aren’t going soft either: Hopes that Trump’s return would usher in a lighter-touch approach to M&A are fading fast. The US Justice Department and the Federal Trade Commission are sticking with strict merger reviews, while the Federal Communications Commission has signaled it may oppose negotiations involving companies that promote diversity and inclusion policies.

Big-ticket agreements now come with political calculus: Geopolitical strategy is increasingly guiding transaction flow. BlackRock’s USD 19 bn acquisition of Panama Canal-linked port assets — reportedly blessed after White House talks — and TSMC’s USD 100 bn investment in US chip facilities reflect a growing tilt toward industrial policy and national security-driven M&A. Advisers are being called “by participants who want to get closer to the United States,” said Hogan Lovells’ global M&A head Bill Curtin.

Caution across the board: A senior strategist at Goldman Sachs slashed its M&A forecast for 2025 from 25% to just 7%, while Morgan Stanley and UBS cite “near-term volatility” and more drawn-out processes. Kirkland & Ellis warned that banks remain wary of underwriting agreements, and spreads on public transactions have started widening again — a red flag for merger arbitrage funds, according to Accelerate Financial Technologies.

Private equity and IPOs aren’t filling the gap: A few standout agreements, including Sycamore’s USD 20 bn take-private of Walgreens and a EUR 6 bn loan for Adevinta ASA, have buoyed sentiment, but the overall pipeline remains thin. IPO activity is up just 10% y-o-y and remains well below historical averages. “It’s caused a lot of companies to just pause and see how things play out,” KPMG’s Shari Mager said, citing tariff and policy uncertainty.

MARKETS THIS MORNING-

Asian markets are broadly in the red this morning as global investors brace for more news on Trump’s tariffs later today, with Japan’s Nikkei trading near the flatline, the Topix down 0.6%, and South Korea’s Kospi down 0.4%. Hong Kong’s Hang Seng is also down 0.4%, while mainland China’s CS 300 is flat. Meanwhile, Wall Street futures are down slightly, even after a volatile day that saw indices end the day in the green.

THE CLOSING BELL-

The DFM fell 0.5% on Friday on turnover of AED 431.2 mn. The index is down 1.2% YTD.

In the green: National Cement Company (+14.8%), Emirates NBD REIT (+5%) and Commercial Bank of Dubai (+4.5%).

In the red: Depa (-8.9%), Dubai Islamic Ins. and Reins. (-4.8%) and Dubai Refreshment (-3.6%).

Over on the ADX, the index fell 0.2% on turnover of AED 1.5 bn. Nasdaq Dubai was down 1.2%.