Impact of relaxed regulatory policies on M&A
Much has been said about the new administration’s lenient regulatory policies leading to an uptick in M&A in 2025. However, the approach may not be as laissez-faire as seen in historical contexts.
Comparing merger enforcement challenges brought by the Justice Department and the Federal Trade Commission, there were 116 M&A challenges between fiscal years 2017 and 2019, a period that roughly corresponds with President Donald Trump’s first three years in office, compared to 110 between fiscal years 2021 and 2023, a period that roughly corresponds with Biden’s first three years in office. This clearly suggests that Trump’s first term in office was arguably just as tough for M&A approvals as President Joe Biden's term.
Nevertheless, the number of Hart-Scott-Rodino (HSR) filings was at its lowest under the Biden administration, indicating an aggressive anti-merger stance that likely discouraged potentially anticompetitive transactions. While this strategy may prevent problematic deals from reaching the Department of Justice Antitrust Division, thus saving time and resources, it could also suppress broader merger activity.
What can be expected in 2025 is continued merger scrutiny, but with a focus on negotiating resolutions rather than questioning cases and blocking mergers entirely.
Impact of new tax provisions on M&A
In the new term, Trump plans to extend the 2017 Tax Cuts and Jobs Act (TCJA) and reduce the effective corporate tax rate for domestic production to 15%. These tax measures could increase the appeal of US companies as acquisition targets and attract foreign entities looking to establish or expand operations in the US.
When Trump enacted the TCJA in 2017 and reduced the corporate tax rate from 35% to 21%, the US inbound deal count (US$100m+) during his first three years (2017-19) averaged 19% of total M&A, exceeding the 16% average during former President Obama's first three years of presidency (2009-11).
Impact of trade tariffs on M&A
The geopolitical landscape is shifting as protectionism and economic nationalism continues to rise. President Trump's tariff policies on China and other nations are likely to intensify geopolitical uncertainty. According to our CEO Survey, 96% of US CEOs believe it’s crucial to reevaluate their organization’s transformation strategy in response to increasing geopolitical volatility and policy uncertainty.
Tariffs could significantly affect cross-border deals, which otherwise should be increasing under the new administration's pro-business agenda. Proposed tariffs may raise the cost of imported goods, diminishing the appeal of foreign acquisitions and potentially prompting retaliatory tariffs from countries like China. Such an environment of increased trade barriers and economic uncertainty may discourage cross-border— particularly outbound— investments.
During Trump's first term, similar tariffs were implemented, and an EY insights analysis shows that US outbound deal count (US$100m+) from 2017 to 2019 represented an average of 14% of total M&A, which was lower than the 22% average during Obama's first three presidency years (2009-11).
2025 set for M&A activity surge amid affirming economic conditions
This year is poised to be a pivotal year for M&A, bolstered by key drivers: favorable macroeconomic conditions, a potentially more accommodating regulatory landscape and an increased risk appetite among corporations.
The global economic outlook for 2025 will be defined by a mix of challenges and opportunities. Market evolution, geopolitical shifts and industry-specific structural changes are predicted to chart the course of the US economy.
In light of this positive macroeconomic and deal-making climate, it’s crucial for business leaders to adeptly manage the uncertainties surrounding trade tariffs, tax and regulatory policies.
Key deal drivers
- Increased deal appetite driven by Trump’s pro-business agenda
- Lighter touch for regulatory and tax policies under Trump’s administration
- Improved conditions in the financing market
- Attractive M&A valuations driven by reduced cost of debt
- Companies’ continued rapidly growing data needs from AI adoption
US sector breakdown for US$100m+ deals – 2024