M&A Activity Declines Amid Economic Uncertainty

The global landscape for mergers and acquisitions (M&A) has faced significant challenges in 2025, marking the slowest period for deal-making in over a decade. Several factors, including economic uncertainty, elevated interest rates, and regulatory scrutiny, have contributed to a notable decline in M&A activity worldwide.

Economic Factors Weigh on M&A Decisions

Uncertainty about the economy has played a pivotal role in the reduction of M&A activity. Elevated interest rates have made the cost of financing mergers and acquisitions more expensive, dampening enthusiasm for such deals. Furthermore, the volatile stock market has complicated purchase agreements by introducing risks related to fluctuating valuations. These economic conditions have eroded confidence among companies considering mergers, leading to a more cautious approach.

In addition to these factors, tariffs imposed on various goods and services have created additional uncertainties for potential acquisitions. The uncertain trade landscape has led companies to reevaluate the financial viability of cross-border deals, further hindering M&A activity.

Regulatory Environment and Competitive Concerns

The regulatory environment has also become a significant hurdle for M&A activity. The Biden administration's stance against reducing competition has led to a stricter examination of deals that could potentially increase market power. This heightened scrutiny aims to prevent mergers that would significantly reduce competition, thus protecting consumer interests and ensuring fair market practices.

Regulatory uncertainty surrounding merger approvals has made companies hesitant to pursue acquisitions. The fear of lengthy approval processes or outright rejections has deterred many firms from engaging in M&A activities. This cautiousness is especially prevalent in sectors where mergers could lead to increased market concentration.

Impact on Specific Sectors

The oil and gas industry, specifically the upstream sector, has also been affected by the decline in M&A activity. Upstream M&A refers to mergers in oil and gas exploration, which have traditionally been influenced by crude oil prices. The current low crude prices have negatively impacted the profitability of upstream companies, making them less attractive to potential acquirers. As a result, declining oil prices have led to reduced M&A activity in this sector.

Historical data indicates that upstream M&A activity often follows cycles influenced by economic conditions. The current downturn in the sector mirrors past trends where economic challenges have led to decreased merger activity. Additionally, regulatory factors specific to the oil and gas industry can further affect the approval and execution of mergers in this sector.

Global M&A Trends

Globally, M&A activity has decreased by 40% since 2021, highlighting the widespread nature of the decline. In Europe, M&A deal volumes have fallen by 5%, totaling $375 billion. The British M&A market has seen a more pronounced drop, with market value down by 35%. Meanwhile, Spain's M&A value has plummeted by 58%, reflecting the broader trend of reduced deal-making in the region.

In the Asia-Pacific region, M&A value has reached a 10-year low of $284 billion, underscoring the significant impact of economic and regulatory factors on M&A activity in this area. The combination of economic uncertainty, regulatory challenges, and market volatility has led to a slowdown in mergers and acquisitions across various sectors and regions.

While the decline in M&A activity can harm economic efficiency by preventing the consolidation of inefficient firms, the current environment suggests that companies are exercising caution amid a complex and challenging landscape. As the global economy navigates these uncertainties, the future of M&A activity will likely depend on the resolution of these economic and regulatory challenges.