The pro-business agenda of the new US administration looked set to boost outbound M&A into Europe in 2025, but tariff announcements and geopolitical tumult mean that dealmakers are holding fire for now
Following a year of political and economic uncertainty, transatlantic M&A appeared to be on course for steadier waters in 2025. Both the US and European markets endured a turbulent year in 2024, politically and economically, with widespread elections prompting dealmakers to pause for breath as they had in 2023, following boom years in 2021 and 2022.
However, that initial optimism has dissipated somewhat, given the US administration’s announcements on tariffs and increasingly tense relations between the US and EU, with dealmakers now feeling less bullish than they did at the end of last year.
M&A activity by volume 2014 – 2024
Target locations: Central and Eastern Europe and Western Europe Bidder location: USA Sectors: All Sectors
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Effective July 1, 2023, the underlying Mergermarket data supporting the M&A Explorer was consolidated with Dealogic data to produce an even more complete picture of the M&A marketplace. M&A Explorer commentary published before July 1, 2023 may reference data that does not reflect this consolidation.
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Loosening monetary policies on both sides of the Atlantic looked set to lay the foundations for a more benign financing environment in 2025, with the Federal Reserve, European Central Bank and Bank of England all cutting rates in the latter part of this year.
However, despite decisive electoral results in the US and the UK in 2024, the future direction of certain policies—particularly in relation to President Donald Trump’s protectionist agenda—remain uncertain.
That said, transatlantic dealmaking remained steady through 2024, despite a backdrop of political and economic change. US bidders targeting European assets racked up a total of 975 deals valued at US$80.9 billion over the course of 2024—a marginal 1.6 percent decrease in volume year on year, while value slipped by 10 percent.
The fact that US dealmaking in Europe remained relatively robust throughout a period of deep uncertainty, including continued conflicts in Ukraine and the Middle East and elections on both sides of the Atlantic, is testament to the enduring nature of transatlantic M&A. Had it not been a year of numerous elections, deal activity would likely have been higher.
US-UK bond drives dealmaking
The UK—historically a strong investment partner with the US—continued to attract the bulk of deal interest from US buyers by some margin in 2024, with 368 deals valued at US$38 billion targeting UK companies. Germany and France also drew in a significant number of deals and were second and third in terms of volume.
The highest-valued deal of the year so far saw a consortium led by US PE firm Neuberger Berman Private Markets purchase UK-based international schools operator Nord Anglia Education for US$14.5 billion. The investment aims to support Nord Anglia in delivering world-class education while also diversifying its shareholder base.
Another major deal targeting a UK business was US-based packaging company International Paper’s takeover of rival DS Smith. The deal, valued at US$9.8 billion, trumped a previous agreement with UK packaging rival Mondi. A gap in valuations between US and UK companies with similar qualities has been cited as a motivating factor behind the deal, prompting an increase in deal activity among US companies.
On top of favorable valuations, stabilizing interest rates, post-UK-budget certainty and a healthy quantity of attractive targets are all driving US acquirers’ sustained interest in UK assets, with the country leapfrogging China to become the third-largest M&A market in the world, after Japan and the US.
Trends and drivers
Despite the recent pronouncements on tariffs and the increasingly strained relations between the US and Europe, there are several key trends that could boost transatlantic dealmaking over the coming year.
Firstly, Trump’s pro-business agenda could still have a positive effect on dealmaking, depending on how far the administration is prepared to go with its tariff-setting agenda. While former President Joe Biden’s tenure was characterized by an increased scrutiny of deals—particularly on the grounds of antitrust concerns—the new administration’s promise of deregulation could pave the way for more dealmaking. Europe, with its regional diversity and historical trade and investment ties with the US, could be a key beneficiary if this lighter-touch approach comes to pass.
Europe’s distressed assets will also continue to attract interest from US bidders looking to take advantage of favorable valuations. While the macroeconomic outlook is brightening, lower-rated companies with debt maturing over the near term may still struggle to access the credit they need. This leaves the door open for cash-rich companies and PE firms on the hunt for new targets.
Buoyed by an abundance of dry powder, lower interest rates and pent-up demand, PE activity looks set for a resurgence in 2025. Levels of global dry powder stood at US$2.5 trillion in December 2024, according to S&P Global Market Intelligence. US funds are leading the pack, with industry powerhouses KKR and Apollo Global Management each reportedly sitting on over US$40 billion in dry powder.
Challenges on the horizon
While there are some positive indicators that could potentially drive outbound US M&A into Europe, headwinds are still blowing, particularly on the geopolitical and regulatory fronts.
Despite a decisive presidential election, a significant amount of uncertainty regarding the direction of the US agenda remains, particularly regarding protectionism and pledges to raise trade tariffs. If the new administration follows through on what could be the steepest increase in tariffs in a century, economists have said this could cause inflation to spiral and spark trade wars, which could damage future dealmaking prospects.
Tariffs, alongside labor force disruptions driven by the administration’s deportation agenda and objection to diversity, equity and inclusion measures, are likely to impact businesses, their supply chains and the market in general. This is sparking a wave of uncertainty that will negatively affect dealmaking, at least in the short term.
Indeed, according to Mergermarket figures, the start of 2025 saw US deal volumes drop to the lowest level in more than two decades. As of February 18, dealmakers signed 1,100 transactions, the slowest start since 2003.
On the other side of the Atlantic, while European regulatory bodies have increasingly adopted an interventionist approach, the UK’s Competition and Markets Authority (CMA) is now easing its previously highly interventionist stance. While deals continue to be closely scrutinized, with some high-profile transactions having fallen through in recent years, there is a notable shift underway. With the UK government's new strategic steer to the CMA, there is now a clear push to create a more business-friendly environment that fosters growth. This shift aims to strike a balance between regulatory oversight and a more favorable landscape for M&A, in order to create a more supportive atmosphere for investment and business expansion in the UK.
The regulatory landscape that dealmakers are navigating is also constantly evolving. For example, under the EU’s Foreign Subsidies Regulation, M&A transactions in the EU trigger a notification to the EU Commission, placing a greater administrative burden on multinational companies and foreign investors in Europe.
Outlook
The outlook for dealmaking between the US and the EU remains uncertain for at least the next quarter. The threat of tariffs and their negative impact on businesses and supply chains, the protectionist rhetoric on both sides of the Atlantic, a still-volatile geopolitical environment, and any unforeseen political shocks will give dealmakers pause for thought.
That said, the fundamentals of the M&A ecosystem are solid: Buyers and sellers are still eager to get deals over the line, the regulatory environment is likely to become more favorable, and interest rates are trending downward. Meanwhile, the favorable valuations and sheer variety of Europe’s assets will continue to attract interest from US buyers, both strategics and sponsors.
Ultimately, it appears that the intentions of the new US administration could play out in one of two ways, either supercharging businesses back to the deal table after the initial stand-off or prompting trade wars that could stifle dealmaking. The direction of travel should become clearer within the next two to three months, which could provide more opportunities for deals in the second half of the year.
For now, dealmakers will need to keep a close eye on political and economic movements and adapt their strategies accordingly.
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