US Deals 2025 midyear outlook: PwC

30%

Of companies have paused or are revisiting pending deals due to new tariffs

Source: PwC’s May 2025 Pulse Survey

51%

Of operations leaders think that acquiring a company to access talent is very effective in developing a digital-ready workforce

Source: PwC’s 2025 Digital Trends in Operations Survey

31%

Of portfolio companies have been held over five years

Source: PitchBook Data, Inc.

25

Traditional IPOs have hit the market in 2025 (as of May 31)

Dealmakers entered 2025 with expectations for an M&A rally as inflation and interest rate forecasts were on the downslope and a new, presumably more business-friendly administration was about to take office.

Those expectations were met by uncertainty over the administration’s aggressive policies, particularly in regard to trade. Dealmaking growth stalled as companies struggled to predict how new tariff policies would impact business models — or if the policies would change before implementation. PwC’s May 2025 Pulse Survey found that 30% of respondents have paused or are revisiting deals due to tariff issues.

So far, deal volume (4,535) and value ($567 billion) are comparable to a year ago. We believe an upswing is still possible, but it’s unlikely without more policy clarity and stability.

Inside the C-Suite: How leaders are thinking about M&A in 2025

Potential deal activity is still percolating. Asked about their status on pursuing new M&A, 51% of respondents in PwC’s May 2025 Pulse Survey say they have initial steps underway (31%) or are beyond initial steps (20%). The administration’s policy shifts are likely short-term obstacles. Over the long haul, they may contribute to existing economic, technological and geopolitical trends pushing businesses toward transformation. The question is exactly how long it will take to reach a policy equilibrium in which C-suite leaders are comfortable deploying capital on major new investments.

During the lull, dealmakers can prepare for a dynamic operating environment as they evaluate their M&A strategy and execution. Running scenario analysis and having value creation roadmaps under the potential scenarios will be of critical importance to driving value through M&A. The critical question facing dealmakers right now is whether they try to wait out the administration’s current policies. The current volatility will create opportunities for strategic and financial buyers who can move quickly and decisively.

Divestiture activity, for instance, is likely to pick up as activist investors often begin circling during uncertain economic times. In 2024, activist activity by hedge funds and investment managers was 16% higher than the 5-year average (2019–2023) and 44% higher than the 10-year average (2014–2023), according to S&P Global Market Intelligence. This suggests a notable uptick in activity. Corporates that actively manage their liquidity may have a chance to land a key asset from a competitor. We’re seeing PEs conducting preliminary due diligence on many corporate divestitures but they remain mostly bearish on valuations.

Companies need to be able to identify sources of uncertainty and the various outcomes they might produce. There’s a significant opportunity for dealmakers who understand the impacts that changes have on elements including costs, margins and pricing power. Scenario planning around sources of uncertainty needs to be conducted more frequently — such as once a month or even more frequently instead of once a quarter or annually. Agile companies know what they want to buy or sell in multiple scenarios and are ready to act.

Our recent Pulse survey indicated that energy sector deals are most likely to have been put on pause due to tariffs, while consumer markets deals were least likely to have been delayed. Let’s take a closer look at the themes we see affecting M&A in general.

M&A comeback hits pause

The new administration has made rapid and aggressive trade policy moves, and the antitrust regulatory approach continues to evolve. These changes didn’t stop some large deals that were already close to being announced. And there were the most mega deals ($5 billion-plus value) announced in May 2025 by US buyers of any month over the last three years. But the shifts have dampened overall enthusiasm for new M&A activity, at least temporarily. Going forward, we expect dealmakers to conduct more diligence on modeling both direct and indirect tariff impacts when considering potential targets.

M&A leaders can look for opportunities to insulate their companies from what we think will be continued policy volatility. This might involve new investments in sourcing and supply chains, shifts to more stable sectors and developing business strategies that mitigate risks in a more nationalist trading environment. Dealmakers in services businesses, or companies that primarily have a domestic footprint, may feel more comfortable engaging in M&A amidst the current volatility. The percentage of cross-border deals has dropped every year since 2021 and is on pace to do so again this year. It sat at 16.9% as of May 31, 2025, down from 18.7% in calendar year 2021, according to S&P Global Market Intelligence.

What executives can do

CEO: Make trade policy-related strategy decisions based on data-driven scenario planning. Analyze the benefits and potential drawbacks of trade and customs optimization, supply chain restructuring and engagement with policymakers.
CFO: Carefully manage liquidity and the financial fundamentals of your business. Position balance sheets so your company can move quickly when market conditions become more favorable — or when advantageous buy or sell opportunities arise.
Corporate development leader: Use deals to test the viability of alternative markets better suited to evolving trade policies. Start with a small acquisition, then ramp up if it’s a good fit.

A drive for strategic repositioning

Many companies were content with the surging stock market and put off larger strategic shifts over the past few years. But the pace of economic change and technological disruption with AI has accelerated sharply in the past six months. PwC research shows that the global economy could be nearly 15% bigger than expected in 2035 if AI delivers a jolt to productivity comparable to the productivity booms ignited by foundational technologies in the past.

Coasting on the overall market’s success is no longer an option. We think many companies will soon be forced to make significant changes to their strategies and accompanying portfolios. M&A is a powerful tool for this strategic repositioning. Behind the scenes we’re seeing companies considering divestitures to achieve more portfolio focus instead of emphasizing diversification. Technology and consumer markets led recently announced activity by volume, with the most common motivations being to refocus on core markets, strengthen the balance sheet and divest underperforming businesses. We’re also seeing a renewed push to comprehensively integrate businesses bought in the past few years to achieve unrealized synergies, such as cross selling products or implementing a standardized CRM system.

While often underutilized, talent is a growing value creation lever in M&A. For example, when the most sophisticated companies are preparing for sale, or conducting diligence on a target they are focusing on:

The change agility of the organization: How well is the company positioned to adapt and quickly drive change and what level of alignment is there across the leadership team on the path to growth?
Skills investment in the organization: Is the organization aligned to adapting to AI and getting the workforce future-ready?
Right-sizing total rewards to retain top talent: Are rewards aligned to what the workforce values, especially in times of significant change? Companies are using the integration process to implement more popular — but less costly — benefit programs.

What executives can do

CEO: Conduct regular, thorough portfolio reviews. Consider divestitures to bring your company more in line with market trends away from diversification. We continue to see industry convergence, unprecedented advances in AI and shifts in value chains. Companies have a real need to reinvent business models and create new ecosystems. M&A, including divestitures, can be an important tool in this process.
Corporate development leader: Build out your strategic macroeconomic, market and competitor analysis capabilities. Use those capabilities to build a multi-country strategy that aligns with long-term objectives such as supply chain diversification, access to talent, or market growth.
CHRO: Many companies need to acquire new capabilities while retaining the talent that supports those capabilities. Tailor total rewards — while identifying savings — through preference analytics. Surveying employee preferences enables investments in rewards such as benefits, skills and mentorship that align with what employees value.

How will evolving markets impact private equity?

Private equity has been quiet lately but may find selective opportunities in the new environment. Many PE funds haven’t been able to exit from long-held portfolio companies due to valuation gaps. But firms still have vast amounts of dry powder to acquire public companies or divestitures at an attractive price. Take-private deals were on pace to exceed most previous years through the first quarter. We see some PEs expanding their offerings of private credit due to factors like higher interest rates and pending debt maturities.

What executives can do

PE: Understand how trade policy changes are priced into your target’s business model. Determine strategies for preserving margins and cash flow under the new policies.
CEO: Develop and articulate an equity story (which includes an AI component) to make the company attractive to PE. Having an AI strategy may help boost valuations during deal discussions with PEs.
CFO: Perform debt readiness assessments to evaluate your company’s access to different pools of capital. This includes analyzing whether capital needs could be met through private credit — and assessing the trade-offs in terms, structure and risk exposure under various market scenarios.

Learn more about Private equity.

Capital markets waiting for clarity

The US IPO market entered 2025 with renewed optimism following a stronger-than-expected close to 2024. Momentum, however, stalled by the end of the first quarter amid macro headwinds including stubborn inflation, mixed signals on AI-driven valuations and shifting trade and regulatory policy under the new administration. There were a total of 25 traditional IPOs valued at $11 billion through May 31.

While the real economy remains resilient, the Federal Reserve has adopted a wait-and-see approach on interest rates amid conflicting signals. Inflation remains elevated, but downside risks to growth are also high.

Meanwhile, SPAC issuance is enjoying its most active start since 2022, though de-SPAC activity remains muted. The modest resurgence in SPAC activity comes as market participants seek flexible alternatives to traditional IPOs amid ongoing volatility. Some sponsors are bringing higher-quality targets to the table, which may contribute to a more disciplined and sustainable SPAC environment.

Find out more in our new Capital Markets Watch.

What pre-IPO executives can do

Board: Boards can use this time to assess whether the company has the right governance structure, controls and leadership bench in place to meet the demands of public company oversight. This includes strengthening audit committee readiness, reviewing executive compensation design and ensuring alignment between strategic priorities and shareholder expectations. Taking a proactive, long-term governance approach will position your company to move quickly when the IPO window reopens.
CEO: Concentrate on sharpening your company’s equity story and aligning internal teams around the operational discipline required in the public markets. This includes establishing a clear path to sustainable profitability, demonstrating scalable growth and building a culture of transparency and accountability. Now is also the time to develop investor messaging and deepen relationships with potential stakeholders to build future demand.
CFO: Act like a public company at least a year before going public. Prioritize building a public-company-ready finance function — from accelerating the monthly close to preparing for quarterly reporting, internal controls (SOX) and SEC-compliant disclosures. Forward-looking guidance, KPIs and a deep understanding of what drives valuation will be critical. It’s also a good time to engage with advisors and underwriters to test assumptions and ensure that your financials, forecasts and capital structure are IPO-ready.

Sectors to watch

Here’s a closer look at three sectors where M&A activity bears watching in the back half of 2025. Check out our sector special reports for in-depth discussions on these and other sectors.

Higher interest rates and aging founders of asset managers are important deal drivers in the industry. Insurance dealmaking remains healthy as interest rates drive demand for asset-intensive businesses, such as life and annuity assets. Insurance brokers and managing general agencies remain attractive deal targets given their steady cash flows. We expect some IPOs in the insurance broker subsector this year.

Asset management companies, including large PE funds, continue to look for ways to boost revenue through new markets and products as private markets attract investor attention. Private credit’s growing popularity is a key driver. Many traditional asset managers and private equity firms are using deals to build their private credit capabilities and product suite. With many aging founders looking to exit, we could see more sales or IPOs in the asset management sector.

Fintech and consumer finance remain focused on dealmaking. Bank dealmaking among small regionals also has remained steady. Most bank deals are paid for in acquirer stock, so bank stock volatility can be an important factor to watch to help predict M&A trends in the near-term.

Explore financial services outlooks:

Although the industry is optimistic about long-term M&A prospects, two primary factors are driving near-term uncertainty.

First, new leadership and approaches at federal health agencies have created uncertainty for new drug approvals and pricing. Shifts in process — longer approval times, for example — could significantly change the economics of drug development. At the same time, GLP1 inhibitors continue to disrupt the sector. Companies are rolling out new medicines in this category and researchers continue to explore their possibilities.

Trade policy is also a concern. Over the past five years, China has transitioned from being a nice-to-watch market to a central pillar of global biopharma innovation. Today, one-third of in-licensed molecules at US pharma multinationals originate from China, up from virtually zero in 2019.

Explore biotech and pharma outlooks:

Trade policy changes are impacting industrial subsectors, with market uncertainty shifting deal activity toward industrial services and supply chain-resilient assets, particularly those with a domestic focus.

Executives’ sharp focus on core competencies is shaping 2025 strategy, driving divestitures of non-core businesses and product lines. With long-term cost pressures, efficiency and digital enablement are rising priorities, potentially fueling deal activity in the year ahead.

The automotive sector entered the year focused on structural capacity restructuring and realignment. Tariff and regulatory uncertainty have accelerated the need for action, prompting original equipment manufacturers (OEMs) and suppliers to divest non-core assets, prioritize electrification and pursue joint ventures to manage rising tech costs.

Explore industrials and automotive outlooks:

The bottom line

While M&A numbers haven’t met market expectations, companies likely will still need to adjust their portfolios to the significant economic, tech and geopolitical trends roiling the operating environment. We continue to see industry convergence, unprecedented advances in AI and shifts in value chains. Yet many companies are grappling with how to unlock value in a more volatile and higher cost of capital environment. Achieving a deal thesis now depends on delivering operational performance and strategic transformation. To keep pace, companies need to reinvent their business models, create new ecosystems and acquire new capabilities. M&A is a crucial tool in this transformation process. The companies that will win in this scenario are not those that sit and wait but those that proactively plan so they can act decisively when opportunities arise.

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