Global Acquirer Trends, Q1 2025: M&A on Ice
Key Trends
- Global M&A transaction volumes decline 28% year-on-year and 24% from Q4 2024
- North America the worst effected region with a decline of 30% year-on-year
- All geographies impacted, with steep drops in cross-border M&A including North American investments into Continental Europe, down 41% year-on-year
- UK is the ’best’ performing area, but transaction volumes still fall by 19% year-on-year
- Material decline in investment volumes across all the major sectors
Deal Volumes Slump on Trump Uncertainty
Uncertainty over US economic policy coupled with falling equity market valuations led to a slowdown in global M&A even before the introduction of “The Liberation Day” tariffs. The latest Global Acquirer Trends analysis by Arrowpoint Advisory shows that overall transaction volumes fell materially in Q1 2025, declining 28% year-on-year and 24% from Q4 2024.
All geographic regions saw a reduction, with the worst effected being North America and Continental Europe (excluding the Nordics) where volumes were down around 30% both year-on-year and quarter-on-quarter. The steepest drops within each of these regions related to cross-border M&A investment into each other. North American investments into Continental Europe were down 41% and the volume of European investment into North America was down 33% year-on-year.
Similarly, APAC investment into North America was down 24% year-on-year, suggesting that the uncertainty over new tariffs had already caused businesses to adopt a cautious approach rather than spurring new investments to bring manufacturing closer to consumption.
Domestic deal volumes were also down across all geographies, with volumes within North America and Continental Europe down 26% and 43% year-on-year respectively. In addition to the general economic uncertainty, valuation mismatches between buyers and sellers against a backcloth of falling equity markets have contributed to the slowdown. A heightened regulatory environment has also played a role, with increased scrutiny from anti-trust and national security authorities making it more challenging to complete deals.
The UK experienced a 19% year-on-year drop in deal volumes, making it the ’best’ performing region globally in relative terms. This better performance could be attributed to the new Labour government's plans to deregulate areas of the economy to drive growth and its emphasis on providing stability. Measures such as easing restrictions on deployment by pension funds and promoting technological innovation have boosted investor confidence. Additionally, efforts to rebuild relations with the European Union and reduce trade barriers are creating a relatively more favourable investment climate.
The decline in volumes was largely uniform across all the major sectors, with Consumer (down 32% year-on-year), Business Services (down 30% year-on-year), Industrials (down 29% year-on-year), Pharmaceuticals (down 26% year-on-year) and TMT (down 25% year-on-year) all seeing significant drops. This reflects the pervasive impact that US tariffs and the general tone of geopolitics could have on the world economy.
Caution to Prevail in Q2
We continue to experience strong interest in M&A. Private equity investors are under pressure from their own investors to accelerate realisations and deploy dry powder. Boards view accessing technological advancements like the rise in artificial intelligence as opening new doors to growth as well as increasing operational efficiency. Even a fracturing of the global trade system is more likely to dislocate – rather than halt - M&A deal activity, whether in the shape of divestitures or acquiring assets and capabilities across different jurisdictions as businesses seek to reshape portfolios.
However, there is a yawning gulf between interest and execution. This can only be bridged through greater certainty in the macro-economic environment, whatever form that may take. Since the start of Q2 2025, this uncertainty has only intensified with the introduction by the Trump administration of a swath of tariffs on 2nd April, some of which have subsequently been raised upon retaliation, while others have been temporarily frozen or reduced. It is difficult to see markets settle on the outlook for inflation, interest rates and growth until we have a more settled sense of the new framework for global trade.
High valuations in certain geographies add another layer of complexity. In the US, even after the recent sell-off, equities continue to trade at elevated price-to-earnings ratios versus historic levels. This makes it challenging to justify the cost of acquisitions, particularly when the outlook is so unclear. By the same token, regions such as the UK which have been relatively undervalued in recent years may not be affected to the same degree. Our Q1 2025 data supports this thesis.
In sum, companies and investors are adopting a cautious approach, sitting on cash and waiting for more stable conditions before committing to significant transactions. It is unlikely that we’ll see this trend reversing in Q2 2025.
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