The US is being seen as the beacon of mergers and acquisitions (M&A) activity this year, amid an expected surge in dealmaking worldwide.
President Donald Trump’s pro-business stance and “America First” philosophy could make US firms more profitable, which could positively impact valuations, according to at least one specialist. At the same time, however, economic uncertainty, driven by Trump's tariffs and trade policies, could dampen M&A as investors take a wait-and-see approach.
“If Trump’s policies make US businesses more profitable, that will impact valuations, which could be positive or negative,” said Rowan Bamford (pictured), president of Liberty Global Transaction Solutions (Liberty GTS), the M&A insurance team within Liberty Mutual.
“If sellers see their businesses thriving and demand a 20% increase in price, but buyers can’t justify it due to borrowing costs, we could see the same kind of mismatch in expectations that has characterized recent years, where sellers believe they can achieve one price, and buyers believe they can afford another.”
Trump’s policies could be beneficial in a domestic context if the increase in profitability outweighs the burden of borrowing, Bamford said. However, what’s important is how his policies affect inflation and interest rates, as those factors will shape the market.
“If businesses generate more cash and people feel better off, that’s a good thing,” Banford said. “But if higher tariffs push up the cost of goods, that could drive inflation, leading to higher interest rates that ultimately choke off deal activity.”
One defining characteristic of the US M&A market is its overwhelmingly domestic nature. While global trends influence deal-making, sentiment within the US is the real driver. Trump's "America First" approach has reinforced the US M&A market's tendency to focus on domestic deals rather than cross-border transactions.
“Because M&A activity in the US is predominantly domestic, I don’t think we’ll see a huge influx of foreign investment,” Bamford said.
One undeniable factor in the return of bigger deals is borrowing. "Typically, the bigger deals require bank funding. When those deals come back, it reflects private equity sentiment that interest rates are stabilizing and that it’s a good time to borrow money," Bamford said.
"Private equity firms don’t move on gut instinct. When borrowing costs are more predictable, that’s when they act."
Mergers and acquisitions in the US are poised to accelerate in 2025, according to Liberty GTS, but not necessarily in any one dominant sector. The company’s data suggests that while technology and healthcare will continue to see activity, smaller deals in other industries will also play a role.
Additionally, Liberty GTS found that while activity levels were up last year, the size of deals was much smaller. This burst of smaller deals likely came from pent-up demand following a period of stagnation during COVID, Bamford noted. "These were deals for what we would call SMEs or lower-value businesses, quite often owned by founders looking to sell up and move on,” he said.
That wave of activity, however, didn't necessarily translate into huge payoffs for those facilitating the transactions. Smaller deals resulted in smaller insurance limits. However, that trend shifted toward the end of 2024, with larger deals re-emerging.
January and February again saw slower M&A activity, Bamford said, as the market tried to understand the potential policy impacts of Trump’s tariff threats.
But while aggressive US trade policies have introduced some uncertainty, they could potentially create a more stable environment for deal-making if their long-term effects become clearer.
The key is predictability and medium-term economic stability, which encourages private equity investment. "Stability is the single most important factor for M&A activity,” said Bamford.
“If buyers and sellers can predict what’s coming, they can make deals. If they can’t, they won’t.”
What are your thoughts on US M&A trends this year? Please leave a comment below.
