Fresh from the announcement that Columbia Banking Systems is acquiring Pacific Premier Bancorp in a $2 billion stock transaction, board member Chris Mitchell is feeling pretty good. Mitchell, formerly a director at Pacific Premier, will join the board at Columbia, a post-merger regional banking behemoth with $70 billion in assets. “This was an industry, regional middle-market banking, that was starved for deals the last four years,” he says. “We’re now at the front end of a very large M&A movement.”
While acknowledging that banking is one of just a few sectors experiencing an M&A resurgence, Mitchell says others are poised for dealmaking triumphs. “There are definitely layers of uncertainty out there, but it seems like enough people are interested in M&A conversations to offset them,” he says.
If his prognostications come true—overcoming high hurdles in the way—dealmaking may finally pick up. The volume of M&A transactions began a steep descent in 2022 and has flatlined ever since. Dealmaker reservations are attributable to inflation, elevated interest rates, geopolitical factors, regulatory scrutiny and, since January, the impact on supply chains of ever-evolving tariffs.
After President Trump launched a global trade war on April 2, dubbed “Liberation Day,” deal volume hit a 20-year low. The tariff tensions eased in June and the number of M&A deals revived in July, but nowhere near the anticipated volume. “After Trump was elected, a lot of market participants expected 2025 to be a return to the gangbuster days we saw in 2021, but that has not been the case,” says Adam Reilly, national managing partner of Deloitte’s U.S. mergers, acquisitions and restructuring services practice. The first six months of 2025 were “not a bad market; it’s an okay one,” he says.
In late July, a spate of deals led to the highest-volume week for U.S. company M&As since 2021, according to LSEG, suggesting momentum may pick up in the second half of 2025. “I’m not an expert on timing the M&A market,” says Reilly, “but I’m frankly surprised how resilient it has been, given the amount of turmoil we’re dealing with. We could very well see a significant pullup the rest of the year into 2026. There are lots of tailwinds for growth-seeking companies with money to spend.”
Encouraging conditions include a more favorable antitrust regulatory climate for strategic deals, generally strong corporate profit margins and cash flows, keen interest in acquiring entities with superior technology assets like AI, and activists pressuring companies and financial sponsors to spin off businesses and assets. “It feels like we’re moving from uncertainty to cautious optimism,” Reilly says.
BY THE NUMBERS
Despite relatively flat M&A activity in the first half of 2025, sectors like technology, healthcare, energy and industrials fared better than others, EY-Parthenon’s July 2025 U.S. M&A Activity Insights report revealed. Transaction values increased, primarily for larger transactions. Notable deals through June included Google’s acquisition of Wiz, for $32 billion, Diamondback Energy’s $26 billion acquisition of Endeavor Energy Partners, Constellation Energy’s $16 billion acquisition of Calpine, Sycamore Partners’ $10 billion acquisition of Walgreens Boots Alliance and Skydance’s $8 billion merger with Paramount. In July, Union Pacific announced plans to acquire Norfolk Southern to create a $250 billion enterprise.
While Big Four M&A consulting firms and many board members predict M&A momentum will pick up through the remainder of the year, they also acknowledge that dealbreakers could whip up at a moment’s notice and disrupt their expectations. “Our M&A survey suggests that this will be a strong year, but the uncertainties out there keep pushing the timeframe out,” says Dean Bell, lead director on KPMG’s board and head of markets for deal advisory and strategy. “Three-quarters of the respondents expected to do a deal in Q3, but that now looks like it will be Q4.”
A similar opinion was voiced by Kevin Desai, U.S. deals platform leader at PwC. “We polled 670 executives on what’s making M&A difficult for them, and the No. 1 response was U.S. economic policy, followed by AI and data regulations. The third was U.S. trade policy,” he says. “Many deals paused [after Liberation Day], revived in June but may be delayed again.”
Desai is referring to President Trump’s penchant to issue high tariff warnings and deadlines, change his mind and then change it back again. In February, for example, Trump issued a 10 percent tariff rate on imports from China. He subsequently increased it to 20 percent and then kicked it up to a stratospheric 145 percent in April, before reducing the effective tariff rate to 30 percent in May. “Sectors reliant on international supply chains are reticent to take on the M&A risk of tariffs,” says Reilly. “While sellers tend to have a positive view this will all go away sooner than later, buyers have a negative view, resulting in deal valuation gaps that are hard to bridge.”
Trump’s antitrust regulatory oversight is also not what many market participants expected upon his election. Although the regulatory environment for bank M&A activity appears to be more accommodating, other sectors have yet to see a moderating influence. According to a June report from the large international law firm Wilmer Hale, “Meet the New Boss, Not So Different from the Old Boss,” the new leaders of the Department of Justice Antitrust Division and the Federal Trade Commission “are acting and talking in ways that differ in most respects only modestly from antitrust leadership in the Biden era.”
Desai concurs. “There was a bit of M&A market participant overexaggeration of what would happen [in Trump 2.0],” he says. “Regulators are still scrutinizing deals, putting the onus on management and the board to be thoughtful about diligence. It’s not free and clear. Headwinds continue to exist.”
These include high borrowing costs, due to rising national debt and interest rates. “Right now, it is unbelievably expensive to finance a deal, forcing companies to be more creative,” says Kimberly Valentine-Poska, board member at Empire Valuation Consultants, where she chairs the cybersecurity and risk governance committee.
Geopolitical challenges are another question mark. Tensions are evident in the trade war between the U.S. and China, ongoing conflicts in the Middle East and Europe, shifting global trade alliances and recent elections that suggest growing nationalism. “Elections are uncertain by design as we don’t know who will win, but couple that with how a country is being governed and it produces uncertainty,” says Javier Saade, board member at publicly traded Henessy Capital Group and private companies Golden Pear Funding and Swedish Health Services.
Another headwind is global shifts in energy production. The energy needed to power the exponential growth in AI is shifting global M&A perspectives, Saade says. “Will the U.S. have enough power, and, if not, which countries are likely to have it?” he explains. “It may not be a top boardroom consideration right now, but it will be soon enough.”
HOPE IS IN THE AIR
As always with M&A, even the cloudiest projections show glimmers of sunshine. At the end of July, the stock market was at record highs, consumer and business spending had picked up and the U.S. economy was improving, expected to tick up a notch in the second quarter of 2025, following the 0.5 percent annual decrease in first quarter GDP. These factors suggest more deals are quietly in the works.
Things can only improve, an analysis by Citibank of M&A data since 2001 alludes. Since the first half of 2001, M&A volume as a percentage of the North American Equity Market Cap averaged 1.8 percent, versus 90 basis points in the first half of 2025—half the volume. “To me, the metric implies an increase in volume as deals return to the historical precedent,” says Devin Murphy, board member at publicly traded companies Phillips Edison & Company, Macerich and CoreCivic.
Murphy posited that heightened activity by shareholder and investor activists will pressure boards to scrutinize assets, driving management toward corporate separations and other deals that unlock value. Desai shares this opinion. “Activists are starting to push companies to think about their portfolios of businesses, questioning whether the organization is the right owner of these assets,” he says. “If not, then it’s probably time to carve them out and sell.”
Deals also are in motion as companies widely seek to implement AI solutions across the value chain. “As the U.S. moves even more to a service-based economy, businesses looking for opportunities to innovate and grow are eyeing AI as the means. The question for management and boards is, ‘Do we build or buy AI capabilities?’” says Saade.
Many are opting to buy, Deloitte’s M&A analyses suggest. “The vast majority of value creation in the next five years will be driven by investments in technology, a big part of it AI,” says Reilly. “Lots of companies are… looking to do deals to acquire AI products and talent. It’s a very expensive trend because these are highly valued companies.”
Mitchell agrees. “Size and scale matter in M&A,” he says. “That’s always been true, but even more now given required investments in technology broadly and AI more specifically.”
Acquiring a company primarily for its AI capabilities and talent is not for the fainthearted. Arriving at a precise valuation is a complex undertaking since AI-heavy companies are valued for intellectual property like algorithms that are inherently difficult to gauge. The risk of AI talent leaving post-transaction for higher compensation elsewhere is equally daunting. As The Wall Street Journal reported in late July, Meta CEO Mark Zuckerberg is offering compensation packages in the hundreds of millions of dollars to superior AI talent.
While boards are carefully navigating how best to assist management in sifting through the technological complexities, pulling the pin is not easy. “Historically, companies bought other companies for shareholder financial accretion, but here they’re looking to buy a business purely for its AI capabilities,” says Valentine-Poska. “Board focus on governance is intensifying.”
TEMPERED OPTIMISM
While the interviewees see opportunities ahead for an uptick in M&A dealmaking, they’re also hedging their bets. Valentine-Poska is “cautiously optimistic,” pointing to a narrowing M&A bid-ask spread in certain sectors. “Valuations are getting closer, but there’s still a differential due to high interest rates and the difficulties that presents to finance a transaction,” she adds.
“Sellers have come back to earth, realizing buyers don’t think their assets are worth what they thought they were worth. That makes me excited about bullishness the rest of the year,” agrees Bell. Nevertheless, he acknowledges that the cost of capital remains an obstacle. “As private equity looks to finance deals getting more expensive, they want to be sure they’re not being speculative. That could cause them to wait until rates come down to do a deal.”
The passage of President Trump’s Big Beautiful Bill gives Desai a modicum of hope for an M&A revival. However, he remains concerned about an aggressive regulatory stance. “At a minimum, the legislation allows for steadier corporate tax rates and the deductibility of expensive carry-forward interest—fuel for the M&A fire,” he says. “The challenge is antitrust regulation. The SEC’s new commissioners have yet to issue public statements or [provide] literature on the ‘new normal.’ For now, I’m not seeing a slowdown in antitrust challenges. It’s still a very active SEC.”
Reilly is also relatively upbeat, with a few reservations. The government’s business-friendly tax policy, continuing hopes for a Federal Reserve rate cut and the potential for deregulatory actions should combine to boost dealmaker confidence through the second half of the year into 2026, he says. “I’m still a bit wary due to all the uncertainties, but I definitely see interesting opportunities arising.”
What is absolutely certain is that M&A opportunities and risks are front-and-center discussions at many boards, making directors’ service more complicated and demanding. “We’re playing chess with blindfolds on, as no one knows what the future holds and how things will play out,” says Saade. “In this period of extreme disruption and uncertainty, strategic planning is practically useless. We’re in a fast moving, whitewater river.”
He is not alone in this glum perspective. “The risk framework when doing M&A has changed so quickly, and in the next five years the changes will be exponential,” says Valentine-Poska. “Risk averse companies and boards that don’t like change could be up the proverbial creek without a paddle, too consumed with uncertainty to make a decision.”
She and other board members counsel scenario planning. “Right now, the M&A pause button is getting hit more than the play button because of uncertainty,” says Lisa Greer Quateman, board member at Scherzer International and Lyles Diversified. “Boards need to ensure management is exploring multiple possible outcomes when plotting a deal.”
Equally crucial, says Mitchell, is for dealmakers to cultivate relationships with prospective buyers and sellers. “So many transactions are years in the making; they’re not a sudden discovery,” he explains. “Get to know your competition, as you may buy them someday, or they may buy you. Look for cultural synergies, customer extensions—whatever ticks the boxes in the M&A equation. Find common ground and start a conversation.”
