Trump's Return Sparks Hope for 2025 Deals

Wall Street remains optimistic that a surge in the stock market, easing interest rates, and Donald Trump’s deregulation-focused agenda could drive a rebound in dealmaking activity in 2025. However, uncertainty lingers due to the unpredictability of the president-elect’s policies.

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After record-high deal volumes in the immediate aftermath of the pandemic, activity has slowed in recent years. Although global deal volume in 2024 rose approximately 12% compared to the same period in 2023, the number of transactions declined, and overall volume remains significantly below the peak reached in 2021, according to data from Dealogic.

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The dealmaking community gained some encouragement in December when Trump appointed Andrew Ferguson, a Republican member of the Federal Trade Commission (FTC), to replace FTC Chair Lina Khan. Under Khan, the FTC implemented aggressive guidelines aimed at expanding the agency’s ability to block mergers. Ferguson, alongside other Republican appointees, is expected to dismantle these measures, signaling a more business-friendly approach to antitrust regulation.

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Despite this shift, questions remain regarding the Trump administration’s ultimate stance on antitrust policy. Jay Novak, global co-head of corporate finance at Houlihan Lokey, noted that while sentiment among dealmakers has improved, uncertainty persists. “People don’t really know the answer, but they’re more positive about the direction,” Novak stated.

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A few major deals defined the year, including Capital One’s $35 billion acquisition of Discover Financial Services and Mars’s $30 billion purchase of Kellanova, the maker of Cheez-It. However, activity in key sectors like technology and healthcare—traditionally robust sources of large transactions—remained subdued.

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The technology sector, in particular, may continue to face scrutiny under the Trump administration. Regulators are expected to maintain pressure on major players such as Apple and Meta Platforms, both of which have largely avoided deals while grappling with heightened regulatory oversight.

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Lower interest rates and a thriving stock market are likely to provide much-needed momentum for mergers and acquisitions (M&A) in 2025. Reduced borrowing costs make it more affordable for companies to finance deals with debt, while rising stock prices bolster corporate confidence, encouraging CEOs to use shares as currency for acquisitions. “Financing markets are way open such that you can do jumbo deals again,” said Dominic Lester, head of investment banking for Europe, the Middle East, and Africa at Jefferies.

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In December, the Federal Reserve reduced interest rates for the third time in 2024 and indicated the possibility of two additional rate cuts in 2025. While this outlook is generally favorable for M&A, any deviation from investor expectations could trigger stock-market volatility, complicating dealmaking by making it harder for buyers and sellers to agree on valuations.

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The S&P 500 has surged roughly 25% in 2024, providing a boost to market sentiment. The $13 billion merger between advertising giants Omnicom Group and Interpublic Group, announced after the election, has been interpreted as a sign of heating activity. Omnicom capitalized on its elevated stock price to fund the deal entirely with shares.

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According to Mark Sorrell, co-head of global M&A at Goldman Sachs, discussions about potential large-scale deals have increased significantly across the globe. He projects a potential 10% to 15% growth in M&A activity in 2025.

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Private-equity firms are also under growing pressure to sell long-held assets and reinvest newly raised funds to generate returns for impatient investors. “If private equity could afford to wait to sell assets, they did,” said Mahvesh Qureshi, a corporate finance partner at Hogan Lovells. “Those dynamics have shifted.”

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Still, uncertainty surrounding Trump’s policies remains a key variable. The president-elect has pledged to impose 25% tariffs on imports from Mexico and Canada and has threatened an additional 10% levy on products from China. However, Scott Bessent, Trump’s pick for Treasury secretary, has characterized these tariffs as a negotiating tool. Before his appointment, Bessent remarked that the “tariff gun will always be loaded and on the table but rarely discharged.”

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Should steep tariffs be implemented, they could create mixed effects on dealmaking. On one hand, foreign companies might pursue acquisitions in the U.S. to bypass the levies. On the other hand, American importers may pass higher costs onto consumers, potentially complicating the Federal Reserve’s efforts to lower interest rates further. Higher costs could also erode corporate profits, dampening enthusiasm for new deals and curbing demand.

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Despite these uncertainties, bankers report a growing backlog of potential transactions that could materialize under favorable conditions. With declining interest rates, stronger stock markets, and regulatory relief on the horizon, 2025 may see a notable resurgence in dealmaking. However, much will depend on how Trump’s administration balances its policy initiatives with the economic realities of the moment.

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