M&A Still on Hold Amid Policy Uncertainty

After the election, hopes grew that a lighter regulatory touch would reignite passion for mergers and acquisitions (M&A), which had sagged as the Biden administration went to bat against several major deals.

"The Trump administration is expected to create a more favorable deal-making environment than its predecessor, particularly for energy and financial sectors," S&P Global said in blog post early February.

Less than two months into the second Trump term, M&A fires remain dormant, and policy uncertainty could be to blame. M&A activity the first two months of the year was the weakest since the 2008–09 financial crisis, Reuters reported.

One of the biggest spending elements in corporate America is M&A, where companies often pay tens of billions of dollars in cash or stock for a single transaction. Signing the dotted line for something like that, corporate leaders likely want to be sure they have a broad view of the regulatory landscape stretching out ahead, and that's hazy now given the already active Trump administration.

Policy changes have come quickly under Trump, most notably on trade but also on immigration, domestic manufacturing, hiring guidelines, and more. In addition, markets are on edge about this year's U.S. budget as the government approaches a deadline to avoid shutting down March 14 and hasn't raised the debt ceiling.

All this has companies scrambling to understand long-term cost and profit implications. Reuters reported this week that executives are "running into roadblocks" trying to get deals done or even begin talks amid the government policy confusion. So long as trade pressures persist, uncertainty is likely to remain elevated, potentially reining back business spending and confidence.

"You did see throughout the course of earnings season, a record mention of tariffs on earnings conference calls, even to a higher degree than the peak that we saw during the 2018 trade war," said Liz Ann Sonders, chief investment strategist at Schwab, in a late February podcast. "So it is filtering into concerns that corporate managements have."

A new tariff affecting a key product component, for example, could suddenly raise costs beyond expectations, making a potential deal less profitable.

Policy uncertainty aside, the Trump administration also made clear it plans to stay heavily involved in M&A regulation by following the tougher Biden-era 2023 merger review guidelines.

"Stability across administrations of both parties has been the name of the game," said Federal Trade Commission Chairman Andrew Ferguson, in a memo on February 18 to his staff. The U.S. Chamber of Commerce has criticized those Biden guidelines, saying they were designed to chill merger activity, Bloomberg reported.

Though 2025 is still young and optimism around global M&A remains high, according to S&P Global, the chill so far is potentially a headwind for one U.S. sector, in particular.

The Nasdaq Biotech Index (NBI) showed life last year but struggled to start 2025. In a healthy M&A environment, investors often gravitate toward smaller biotech names on hopes they'll be bought because larger developers are always looking for new drugs to add to their pipeline. But biotech M&A "has plateaued," trade newsletter Biopharma Dive reported last month, and the Nasdaq Biotech Index (NBI) is down more than 9% from last fall's highs.

The biggest recent deal was in January when Johnson & Johnson (JNJ) bought Intra-Cellular Therapies (ITCI)—which makes a pill to treat schizophrenia and depression tied to bipolar disorder—for $14.6 billion. More recently, Jazz Pharmaceuticals (JAZZ) announced a deal to acquire Chimerix (CMRX) for $935 million this week.

Pharma companies are looking to expand in areas like obesity, neuroscience, and newer technologies like antibody-drug conjugates that can kill cancer cells without harming other cells, Biopharma Dive said.

Whether this plays out, and whether investors can count on more M&A in other industries, may depend on how quickly the Trump administration makes its policy guidance clearer. Banking sector earnings next month offer the next chance for investors to get a read on corporate M&A enthusiasm.