What a difference a single quarter makes. When DFIN conducted its Mergers and Acquisitions 2025 Trends Survey in December 2024, the M&A deal market was poised for a robust 2025. Now, that forecast seems a bit premature.
Back in December, 62 percent of finance leaders said they planned to increase their deal-making efforts. These decisions were driven by strategic growth plans, technological advancements, and a strong focus on risk management and integration.
So far, 2025 has offered hard proof that even the best-laid plans can be derailed by unanticipated circumstances and external shocks. We’ve certainly had a lot of those in 2025, and the year isn’t even half over.
With the world unsettled by the threat of tariffs, a potential recession, and conflict in Europe and the Middle East, dealmakers are quite sensibly pausing to reassess the business environment.
It’s likely that the pause won’t last too long. M&A activity is expected to pick up later this year as dealmakers look to deploy dry powder. According to one estimate, venture capital and private equity had $2.6 trillion in uncommitted capital as of July 2024. Moreover, the M&A drivers cited in the DFIN study are still valid. Corporations still need to pursue acquisitions to maintain a competitive edge, so we expect they will direct capital toward growth-oriented deals in tech and innovation.
In the meantime, what should potential acquirers be doing to ensure they are ready when the window opens? A few suggestions:
- Strengthen your financial position. To capitalize on opportunities as they emerge, make sure that your balance sheet and cash flow are strong and that you have sufficient cash reserves and financing options in place. Now is the time to optimize working capital, secure flexible financing, and stress-test financial resilience. The companies that prepare today will be the ones that can move decisively when the right opportunities come along.
- Deploy the right technology. As our survey notes, technology is reshaping how deals are sourced, evaluated, and executed. For example, AI and cybersecurity systems help companies enhance decision making and better protect sensitive data. In addition, virtual data rooms provide a secure platform for document storage, sharing and collaboration.
- Prioritize due diligence. Use this downtime to adopt more thorough approach to risk management, improving your chances of uncovering risks and liabilities in potential acquisition targets.
- Watch for emerging opportunities. Changes in anti-trust and other U.S. policies might expand (or contract) the pool of companies you are evaluating for acquisition. With so much happening at once in Washington, extra vigilance is warranted.
- Be ready to act. Have a team in place that can execute the M&A process quickly, from clearly defining acquisition criteria to conducting thorough market research to integrating an acquired company.
Remember, M&A activity ebbs and flows. Longtime industry participants will surely remember how the bursting of the dotcom bubble temporarily ended the M&A boom a quarter-century ago, when deals plummeted from $1.33 trillion in 2000 to $441.3 billion in 2002. Similarly, deals declined during the Great Recessionand then returned.
It has been an eventful year so far (and will likely continue to be), but challenging times often produce great opportunities. Dealmakers who are prepared will reap the benefits when the market rebounds.
