The Waiting Game: Dealmakers Quietly Positioning For A Rebound

There was a slowdown in global M&A activity last month, but mid-market deals and private equity remained resilient. With deregulation, potential rate cuts, and a focus on smaller, strategic investments, firms are cautiously preparing for a more active second half of the year. Evan Berta, an Associate at Hunt Scanlon Ventures, examines EY’s March Merger Monthly for the latest dealmaking dynamics.

After a strong start to the year, M&A activity in February took a noticeable dip. According to EY’s latest Merger Monthly report, the number of global deals over $100 million fell 5.9% year-over-year and 19.5% from January, while the combined deal value dropped a staggering 53% YoY and 34% from the prior month. 

“In February 2025, the M&A market entered a watchful phase,” noted EY, highlighting a broader sense of hesitation across industries. Despite a 12% increase in the number of $1B+ deals compared to last year, there were no mega-deals over $10B, down from six during the same month in 2024.

Still, the mid-market remained active, reflecting a more calculated approach to dealmaking. EY observed that “this combination of factors indicates selective activity in the mid-market,” as firms opt for smaller, bolt-on acquisitions that enhance capabilities without overcommitting capital.

A Mid-Market Moment

The absence of large-scale transactions and a downshift in deal value reflect a broader shift toward strategic, mid-sized investments. Rather than chasing high-risk, high-capital transactions, companies are narrowing their focus to targeted acquisitions that support existing operations. 

“This approach has led to a preference for bolt-on acquisitions, allowing for strategic growth without the commitment to larger investments,” EY reported. With macroeconomic and policy uncertainty still looming, mid-market activity offers firms a way to remain agile while building momentum.

“This approach has led to a preference for bolt-on acquisitions, allowing for strategic growth without the commitment to larger investments.”

Private Equity Adapts

Private equity remained a significant contributor to overall deal activity in February, accounting for 43% of total deal value. 

But PE firms have been adjusting their strategy to meet the moment. Rather than pursuing traditional leveraged buyouts, many are now shifting toward strategic partnerships, minority investments, and smaller, more easily integrated deals. 

“With significant capital on hand, PE firms are expected to maintain active dealmaking … reducing the need for borrowing,” the report stated.

This recalibration is not just about risk avoidance, it’s about preserving flexibility. As EY put it, “by targeting smaller, focused investments, PE players are better positioned to preserve capital and limit exposure to high leverage.” 

These shifts also support quicker integration and long-term value creation, aligning with investor demands for more predictable and sustainable returns.

“With significant capital on hand, PE firms are expected to maintain active dealmaking … reducing the need for borrowing.”

Macroeconomic Crosswinds

The Fed’s decision to hold interest rates steady at 4.25% – 4.50% has kept borrowing conditions stable, but the broader macro environment remains unpredictable. According to EY, “companies are closely scrutinizing the effects of volatile trade policies and economic trends before engaging in substantial mergers or acquisitions.” 

Much of the hesitation stems from uncertainty around new tariffs and deregulation under the Trump administration, leading firms to take a more conservative stance until there’s greater policy clarity.

That said, there’s cautious optimism that regulatory relief and potential rate cuts later in the year could reenergize dealmaking. EY noted, “Amid the current slowdown in activity, the Trump administration’s deregulation efforts and potential interest rate reductions later in the year may lift the M&A market, presenting chances for more affordable debt financing and avenues for growth.” For now, the focus remains on internal optimization, cost control, and operational readiness.

“There is an optimistic expectation for a surge in M&A activity once market conditions become more favorable.”

Looking Ahead

As the M&A market takes a measured approach in the first quarter, dealmakers are quietly positioning for a rebound. “The U.S. M&A market is adopting a wait-and-see approach amid uncertainties,” EY wrote, underscoring the sense of restraint that defines the current landscape. Yet with “ample dry powder and corporate cash reserves,” companies and investors alike are ready to act once conditions improve.

In the meantime, firms are building stronger foundations, streamlining operations, investing in productivity, and keeping capital on hand for when the right opportunities emerge. As EY concluded, “…there is an optimistic expectation for a surge in M&A activity once the market conditions become more favorable.”