Dive Brief:
- U.S. merger-and-acquisition volume is projected to rise only 1% this year, following a 19% spike in 2024, according to a report by Big Four accounting firm Ernst & Young.
- Deal activity — particularly when it comes to transactions valued at over $100 million — showed early positive signs in the first quarter compared with a year earlier, but the outlook has shifted amid “persistently elevated policy uncertainty and heightened financial market volatility,” according to the analysis.
- “Firms entered the year with strong momentum, buoyed by accommodative financing markets and a strong desire to deploy significant amounts of dry powder,” the report said. “Recent trade escalations, however, are leading to headwinds in valuing assets and have the potential to sideline near-term deal activity.”
Dive Insight:
The U.S. has begun negotiations with several nations that on April 9 were granted a 90-day reprieve from high reciprocal tariffs, according to the White House. Baseline tariffs of 10% on goods from most U.S. trade partners remain in place, as do 145% duties on imports from China.
“President Trump’s sweeping tariff announcements in early April have caused a material shift in the global economic and financial outlook,” the EY report said.
The elevated tariff rates, “at levels not seen in more than a century, mark a dramatic reversal from decades of liberalized trade and introduce significant uncertainty for global supply chains, pricing dynamics and corporate planning,” according to the analysis.
While there is the possibility for exemptions by product or trade partner, the lack of clarity around implementation timelines and potential retaliatory measures has prompted many business leaders to pause investment decisions, EY analysts said.
“While dealmaking appetite is strong and pipelines are full, tariff whiplash has put corporate finance leaders into ‘wait-and-see’ mode,” Mitch Berlin, EY Americas vice chair, EY-Parthenon, said in an email. “Elevated tariffs have introduced significant uncertainty for global supply chains, pricing dynamics and corporate planning. The CFOs we’re speaking with are focused on scenario planning, awaiting greater regulatory and economic clarity before moving deals off the sidelines.”
Optimism among finance executives has declined dramatically amid the global economic uncertainty triggered by President Donald Trump’s on-again, off-again tariff measures in recent weeks and months, according to research by finance technology firm Brex.
“The new wave of tariffs announced in early April triggered sharp market volatility — and an even sharper rethink inside finance organizations,” the Brex report said.
Coming out of the 2024 U.S. election, a Brex poll found that 93% of CFOs were feeling upbeat about their company’s growth prospects, with 82% of respondents feeling the same about M&A opportunities. However, when Brex resurveyed finance chiefs after Trump’s sweeping tariffs, positivity around company growth dropped 18 percentage points. M&A optimism followed a similar pattern, falling 25 percentage points.
“Our new CFO Survey was almost live when the economy changed dramatically,” Brex said in a Tuesday LinkedIn post. “So we took a beat and re-surveyed the same 500 finance leaders to bring you the latest, most relevant insights.”
Separately, Deloitte last week said it is not releasing its Q1 CFO Signals report — a quarterly survey of finance chiefs published by the Big Four firm since 2010 — due to changes in the economic climate since the survey was conducted last quarter, CFO Dive previously reported.
