US dealmaking has suffered its worst start to a year in a decade after policy volatility following Donald Trump’s election and escalating rhetoric over tariffs put a sudden chill on activity.
The overall number of US mergers and acquisitions collapsed nearly 30 per cent in January to 873 deals compared with a year ago, the lowest level since 2015, according to LSEG data. In dollar terms, deal activity fell 18 per cent compared with a year ago.
Dealmakers said the drop in activity reflected anxiety about the new US president’s economic and trade policies, which had tempered some of Wall Street’s early enthusiasm after his election in November.
“It’s incredibly volatile. Whatever you thought of prior administration policy, it provided a steady and predictable backdrop for markets,” said Antonio Weiss, a veteran dealmaker and partner at boutique adviser SSW.
“That’s been replaced by erratic policy, veering between a so-called business-friendly agenda, and trade disputes, isolationism and generally inflationary policies that cloud the interest rate outlook,” he added.
Concerns about the possible economic disruption caused by Trump’s plan to impose steep tariffs on crucial trading partners such as Mexico and Canada, coupled with fears that the president’s populist agenda could stall approvals of new deals, were also weighing on short-term sentiment, said Frank Aquila, partner at Sullivan & Cromwell.
“I continue to believe that it will be a robust year for M&A, but business enthusiasm is fragile and can be easily rattled,” said Aquila.
Signals from Federal Reserve officials in recent weeks that the US central bank would hold interest rates higher for longer had also contributed to “a bit of a slowdown” in M&A in the fourth quarter, said Jonathan Gray, president of private equity group Blackstone.
The $1.1tn asset manager still expected dealmaking to pick up through the course of 2025, as some of the volatility dissipated.
The mood shift marks an injection of caution since early November, when Trump’s election — and the hope of lighter antitrust scrutiny — prompted dealmakers to revive transactions they worried could be blocked by the Biden administration.
“After Trump won we had a flood of calls from CEOs demanding that we get deals previously put on pause back on track . . . it was full-on animal spirits, it was amazing,” said one banker who asked to stay anonymous to avoid irritating the president.
“We’ve gone from full-on animal spirit to cautious optimism among CEOs, there’s too much chaos and uncertainty.”
A top rainmaker, who asked not to be named for fear of being attacked by Trump’s associates, cited the “turmoil and seemingly scattershot pronouncements” since the president started his new term, including “the whole tariff imbroglio”.
It made for “kind of a challenging moment to bet one’s legacy and pull the trigger on something bold”, the person said.
After Constellation Energy bought Calpine, a power plant operator, in a $27bn deal last month energy-focused bankers expected another wave of transactions. The past two years set a record, with almost $300bn in oil and gas deals completed.
But bankers say Trump’s blizzard of pledges on tariffs, deregulation and driving down energy prices has unnerved clients — even those ardently backing his pro-fossil fuel agenda.
“You always have to parse out, what do those executive orders and tariffs and various tweets actually mean that translate to the policy that’s going to affect industry,” said Andrew Dittmar, an analyst at energy consultancy Enverus.
“The uncertainty definitely adds to volatility in the market, and that is a headwind for M&A . . . The larger the gap between outlook for buyers and sellers, the harder it is to get deals negotiated.”
Dealmaking in the renewables sector has been hit particularly hard, according to one banker who specialises in energy deals.
“Green energy investments have been decimated because you’ve got a guy who’s saying he doesn’t like windmills and is pulling permits for wind energy. It’s impossible for the big infrastructure funds, in particular, to get comfortable committing to multiyear projects,” said the person, who did not want to be named.
Wall Street bankers had also spent recent months talking up the prospects for a surge in initial public offerings now that Trump had returned to office touting his pro-business agenda. But aside from a flurry of smaller biotech deals, the year has got off to a slow start.
One nasty shock was the mid-January listing of US natural gas exporter Venture Global — billed as a blockbuster IPO that would set the tone for the year.
But it priced at an equity value of $68bn, a 40 per cent haircut on the initial target. Shares in the company have since fallen by a fifth.
Geopolitical concerns are proving another headwind. The emergence of Chinese artificial intelligence competitor DeepSeek rattled stock markets in recent weeks, denting some investors’ appetite for risky bets on new listings.
“The obvious issue is of course the volatility of US policy and the impact on risk perception,” said Adam Young, the retired former co-head of equity capital markets advisory at Rothschild.
“Buyers of IPOs will require a much more detailed and nuanced description of an IPO candidate’s investment risk relative to listed analogues than bankers usually deliver or help companies deliver.”
https://www.ft.com/content/c9a3106b-0801-450a-8b26-0b3a3b45c297
