M&A Guide 2025: US

For much of 2024, market participants were looking for a more robust M&A environment. The belief was grounded in certain key expectations, including:

• US monetary policy would become less restrictive and therefore lower the cost of borrowing;

• Valuation expectations between buyers and sellers would ‘normalise’ and therefore eliminate price friction; and

• Regulatory concerns would be better understood and therefore be less of an impediment.

While these beliefs conjured optimism, headwinds continued to mute the pace, breadth, and depth of the M&A market in 2024. That said, global deal volume rose off the lows of 2023 and deal value in North America increased by high single digits year on year. Market participants learnt to adapt their M&A strategy and processes to account for macroeconomic and geopolitical issues, and renewed optimism exists for 2025.

Several factors account for the more robust outlook in 2025, such as:

• The final outcome of national elections in the US;

• An apparent ‘changing of the guard’ as it relates to regulatory affairs within the US;

• Financial sponsors continuing to hold ‘dry powder’ at the ready;

• More understanding of attractive valuations as buyers and sellers have internalised valuation expectations;

• Event-driven investors catalysing opportunities; and

• Well-capitalised strategic corporates undertaking transactions that look beyond the current economic cycle, as well as being conscious of having streamlined portfolios.

Market participants are optimistic about countervailing factors, including a healthier IPO market that may provide competition for exit transactions apart from M&A. All in all, however, the M&A markets are expected to improve but will likely continue to lag behind 10-year historical averages.

Dealmakers will continue to strongly consider regulatory enforcement, interest rates, and financial market uncertainty in 2025. In addition, market participants are heavily focused on technology disruption, including the use of AI and how this will affect their industries. With the pace of market movements, dealmakers will be focused on staying on top of the trends and should foment a more aggressive approach to M&A.

The market continues to be driven by both private and public M&A transactions, although private M&A is more prevalent because there are many more private than public companies. The cost of capital and the availability of debt financing is a driving factor, particularly for private company and private equity dealmaking, where acquirer stock is not available as transaction currency. For public companies, well-capitalised balance sheets and an ability to use stock as an acquisition currency remain key drivers for potentially strong deal volume in 2025.

Transactions involving controlling and/or significant stockholders continued to be a topic reviewed by the courts and discussed among dealmakers. While practitioners widely understand that any such transaction must take into account the inherent conflicts and manage them accordingly, the courts’ scrutiny of such transactions inspires debate.

Notably, there has been increased activity related to companies incorporating themselves outside Delaware, the state that has historically been ‘home’ for an outsized number of public companies, despite being one of the country’s most geographically diminutive states.

Controller transactions involving Paramount and Skydance Media, among others, sparked considerable conversation in 2024. Indeed, the market discussions around controller-related transactions were so acute that in February 2025, the Delaware legislature introduced proposed amendments to the Delaware General Corporation Law that would significantly alter the landscape for negotiating and litigating conflict transactions, particularly with respect to controlling stockholders.

Similar to 2023, a constant theme discussed among dealmakers when considering M&A transactions in 2024 was the scrutiny and models of antitrust enforcement and review in the US and around the globe. Particular industry verticals – including technology, energy, and healthcare – continue to be subject to heightened scrutiny from regulators.

Certain mega-deals in 2024 propped up total deal value, including:

• Mars–Kellanova in consumer products;

• Synopsys–Ansys in technology; and

• Verizon–Frontier in telecommunications.

Mega-deals commonly receive extensive regulatory review, and practitioners continue to have somewhat less visibility and certainty as to which transactions will close, and when.

Deal flow in 2024 was somewhat similar to that seen in 2023. Global M&A deal value increased by approximately 9% to about $3.5 trillion, with global M&A volumes rising at approximately 15% year on year.

While transaction volume was relatively static, a larger number of significant transactions buoyed transaction value levels. Corporate acquirors were the driving force in the large-cap market space, accounting for nine of the 10 largest transactions in 2024. In the US/North American market, deal value increased in line with the global increase (i.e., high single digits), driven by an uptick in certain market segments, including technology and energy. While the market did see an increase in deal flow, M&A did not return to its historical 10-year averages.

Generally speaking, market participants are bullish on the prospects of increased deal flow. Dealmakers look to greater clarity on certain macro issues, including monetary policy (i.e., a steady signal from central banks as to the direction of interest rates, including lower rates in the US) and regulatory uncertainty. While no one can speak definitively on those issues, the directional shift of these issues signals a more supportive deal environment.

In addition, capital allocation considerations have dealmakers optimistic on deal flow, as companies are focused on having more simplified and streamlined portfolios as a catalyst towards separation and spin-off transactions.

Private equity sponsors are also providing optimism to M&A participants, with a high level of dry powder available to be deployed. In addition, private equity sponsors are expected to continue to participate in M&A-adjacent structures, including joint ventures, alliances, minority stakes, and continuation fund structures. Moreover, in the private equity space, sponsors will continue to work through more mature/end-of-life holdings that will necessitate transactions.

Increased activism is also a likely catalyst for deal volume, as activist funds continue to raise capital and hunt for ‘big game’ targets. In 2024, nearly a third of activist campaigns targeted corporations with a market cap in excess of $10 billion. M&A is expected to continue to be a theme of activist investors.

Transaction participants have been more keenly focused on the scrutiny that regulators will apply to M&A transactions and how such risks are allocated among the parties to transactions. US regulators have explicitly signalled a heightened sensitivity to the competitive effects of certain transactions and have taken more aggressive actions, including prohibiting particular transactions based upon the presumed anti-competitive effects. This increased regulatory scrutiny has impacted, and will continue to impact, transaction strategies in the global markets. In particular, certain industries – including technology, energy, industrials, and healthcare – will remain under heightened oversight.

Participants in the US M&A market continue to see some acute disagreement between buyers and sellers with respect to valuations. To bridge the difference between the bid/ask spread in M&A transactions, the use of earn-outs, contingent value rights, and other means by which buyers and sellers could mitigate pricing risks becomes more common.

Continuing a trend that has taken hold, representation and warranty insurance (RWI) remains a tool used by M&A market participants to bridge and disintermediate exposures for unknown liabilities.

Debt financing and private capital continue to be a driver of M&A activity.

To address the absence of, or more subdued, traditional financing, parties have been more active recently in discussing alternative financing arrangements with direct lenders and the use of seller financing. In 2025, private capital (financing from non-bank lenders) is expected to feature with more frequency and become part of the established landscape.

Private equity remains a driving force of dealmaking. Although US interest rates have not decreased as forecast for 2024, private equity participants are expected to remain active in 2025, with uncommitted capital at private equity firms remaining at record levels. ‘Middle market’ private equity transactions (i.e., transaction values ranging from $50 million to $500 million) have been, and are expected to represent, a significant portion of private equity M&A volume.

The federal government primarily regulates the issuance and sales of securities through the Securities and Exchange Commission (SEC), antitrust matters through the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ), and foreign investment that may have national security implications through the Committee on Foreign Investment in the United States (CFIUS).

The laws, rules, and regulations administered by the SEC are particularly relevant in the purchase or sale of a US public company. The laws of the target’s state of incorporation govern that company’s internal affairs and impose requirements for shareholder approval of mergers and the procedures for effecting mergers.

Of note in evaluating M&A transactions is that most jurisdictions outside the US have equivalents to the FTC/DOJ in terms of regulating competition and the CFIUS in terms of regulating foreign investment. It is not unusual to see countries outside the US claim jurisdiction over transactions if there is a meaningful business within such home country.

In 2024, competition and antitrust regulators around the globe continued, and in some ways expanded, their review of business combinations and the harms to consumers and competitors. With a new administration in the US, market participants are, optimistically, anticipating a directional shift in policy. That said, many dealmakers understand that while a shift may occur, it is unlikely that all of the Biden administration’s prior polices will be outright reversed, and certainly not in a very expeditious timeframe.

The prior administration in the US was very aggressive in regulating M&A, with a large number of transactions having been litigated and blocked outright. The first Trump administration was not entirely merger friendly (specifically, disfavouring behavioural remedies), but the second Trump administration is expected to be more accommodative. That said, while antitrust/competition reviews may be less stringent, tariffs and ‘trade wars’ could result in increased use of foreign direct investment regulation as a tool with political motivations.

In addition, new Hart–Scott–Rodino (HSR) rules took effect in February 2025. In connection with the adoption and implementation of those rules, regulators in the US have indicated they would be amenable to revisiting the practice of granting early termination of the HSR waiting period, a practice that has been suspended since 2021.

In general, the US framework seeks to protect ‘consumers’, rather than ‘competitors’. The prior administration was interested in revisiting that paradigm writ large with a view towards regulators focusing on other constituencies, including labour, the environment, and other ESG-related concerns. The Trump administration is likely to reverse that trend.

The new HSR rules materially increase the information that the filing parties must provide. Of particular note, the increased information includes:

• More ‘ordinary course of business’ documents prepared by the parties, describing competition from the prior year;

• Documents shared with the broader set of transaction team participants in addition to officers and directors of the filing parties; and

• Information regarding customers and suppliers.

The new rules also require additional information from private equity filers in certain circumstances with respect to limited partners.

These new filing requirements will prolong the time it takes to prepare an HSR filing. Market participants should be conscious of this timing in formulating transaction timelines and in agreeing to contractual provisions that prescribe the time by which filings must be submitted.

The litigation profile as it relates to the US M&A market may sometimes be overstated. While it is true that ‘public’ M&A transactions have significant probabilities of being litigated, the large majority of all such cases are neither material nor time consuming. A well-run, deliberative, and thoughtful transaction process guided by informed and independent boards of directors will substantially reduce, if not entirely obviate, the risks of litigation. Market participants should not avoid transactions for fear of litigation.

Public transactions often raise the question whether the buyer may pursue indemnity claims or escrow funds, or provide for RWI to satisfy any post-closing claims for a breach of a representation or warranty. Notably, public M&A transactions are without recourse to the target company or the target company shareholders once the transaction has closed. In public company transactions, buyers should assume that once definitive transaction documents have been executed, the parties will be obligated to close, subject only to the receipt of required regulatory approvals or the occurrence of a material adverse event (MAE) with respect to the target company.

An intuitive follow-on question, and one that non-US market participants often ask, is how an MAE is determined; specifically, whether there are quantitative guidelines or whether it is entirely qualitative. There are no definitive guidelines to determine whether an MAE has occurred. While the definition as drafted in the contract is important in terms of, for example, critical exclusions, the question, ultimately, is whether the company concerned has suffered a durationally significant, material diminution of its earnings potential not necessarily tied to macro market conditions but, rather, specific to that company.

The role of technology continues to evolve in the dealmaking process. AI is becoming more prevalent and market participants believe the utility of AI and its impact on M&A could be significant. In particular, companies that use AI may be able to identify targets, understand transaction value and where it may come from, and execute due diligence and integration activities between targets ad acquirors more efficiently.

In public M&A, issues relating to obtaining control of a company are governed by the laws of the state in which a company is incorporated and the company’s organisational documents. Most states require shareholder approval (usually by a vote of a majority of outstanding shares) for M&A. Similarly, in the tender offer context, acquisition of a majority of a company’s outstanding shares is required to obtain control. This would be the case when the target company has recommended the tender offer and in the unsolicited/hostile context, in which an acquiror has launched a tender offer without requiring (or, in some cases, seeking) the target company’s recommendation.

Certain regulatory approvals – including clearance under the HSR antitrust statute, and, for non-US acquirers, from the CFIUS – must be obtained before an acquirer can take control of a US company. Acquiring a US company in regulated industries such as financial services and energy may be subject to additional regulatory scrutiny at the federal and/or state level.

In light of the fiduciary duties of public company directors that generally require them to maximise shareholder value in a sale/change-of-control context, target boards often conduct some form of a pre-signing market check – an auction-type process. In some transactions, however, the target board will forgo a pre-signing market check in exchange for a ‘go shop’ right to solicit competing offers for a limited period (usually 30–60 days) after signing the transaction agreement.

An overarching feature of US public company transactions and bidders’ attempts to obtain control of a public company is that US federal securities laws impose disclosure requirements on parties seeking control of public companies. In particular, a buyer must file statements of beneficial ownership when crossing the 5% ownership threshold.

Public company acquisitions can be structured as:

• A one-step merger between the acquirer (or, more commonly, a subsidiary of the acquirer) and the target (typically requiring majority shareholder approval); or

• A two-step transaction involving a tender or an exchange offer by the acquirer for all the target’s outstanding shares (which is generally subject to a ‘minimum tender condition’, requiring the tender of at least a majority of the outstanding shares) followed by a back-end merger.

Both types of transactions are typically subject to the following conditions, among others:

• Accuracy of representations and warranties;

• Material compliance with covenants;

• No MAE on the target; and

• The receipt of regulatory approvals.

Parties to public company merger agreements may employ various deal protection measures to deter third parties from interfering with the closing of an agreed-upon transaction. Parties may employ the following:

• A no-shop provision – a contractual provision that prohibits the target company (and its representatives) from soliciting competing proposals after the execution of a merger agreement.

• Termination fees (‘break-up fees’) – termination fees are payable by the target company to the buyer to reimburse the buyer for its costs and expenses in the event the target company terminates its merger agreement to accept a superior proposal from a third party. In practice, termination fees are in excess of the costs and expenses incurred by the buyer, but the quantum of the fee must not be so large that courts find the termination fees coercive and in violation of the target board’s fiduciary duties. In the US, such fees typically range from 3–4% of the transaction value.

• Matching rights – merger agreements typically include contractual provisions that grant the buyer the right to match, within a number of days, any superior proposal that is received by the target company.

• Voting lock-ups – buyers may secure firm commitments from shareholders of the target company to vote their shares in favour of the proposed transaction.

• ‘Force the vote’ provisions – merger agreements may include provisions, subject to compliance with applicable state laws, that require target companies to put the proposed transaction to a vote of its holders, regardless of whether a superior proposal exists.

The suite of deal protection provisions agreed to in a transaction are, typically, the most heavily negotiated terms.

2024 saw the continued use of earn-outs and other similar provisions under which the seller will receive one or more additional payments, contingent on the target’s future performance, in part to account for differences in valuation.

Completion accounts (known as working capital or balance sheet adjustments) are common in US private company acquisitions.

Locked-box transaction structures are much less prevalent in US private company acquisitions, although they are often discussed.

A trend that continues is the use of RWI in private transactions. The private market has reached a point where RWI is the norm rather than a negotiated point. Market participants, both private equity and strategics, have become comfortable with the product and how it is employed.

All the conditions listed above in relation to public takeover offers (except the minimum tender condition) generally also apply in private M&A transactions. However, in the absence of RWI, representations and warranties usually survive the closing in private M&A transactions and may give rise to post-closing indemnity claims.

Agreements are typically governed by the law of the target’s state of incorporation. If such state has sparsely developed corporate law, the parties sometimes provide that Delaware law will govern certain issues.

The exit environment in 2024 was, similar to the M&A environment writ large, somewhat muted. The IPO market showed certain green shoots as the appetite for equities began to reflect increasing demand. The M&A markets were also somewhat choppy, as buyers and sellers had gaps in their valuation expectations and overall confidence levels ebbed and flowed. Financial sponsors actively sought opportunities but continued to face some difficulties in exiting their investments and in providing an exit opportunity for sellers. Private equity sponsors confronted challenges related to valuations and the cost of debt financing.

Market participants expect a stronger exit environment in 2025. The equity markets grew more buoyant through the second half of 2024 and in the early days of 2025, which bodes well for the IPO market. There is an expectation that improving costs of capital and more moderated regulatory scrutiny will fuel M&A activity.

Market participants are increasingly confident that M&A activity will be robust in 2025. Equity markets and asset prices have, generally, remained strong and are trading near record highs. Corporate/strategic M&A players have strong balance sheets and there is confidence more generally regarding profitability. Financial sponsors are similarly well situated.

As the recent heightened geopolitical and economic uncertainties that characterised previous years dissipate, a material positive shift in sentiment and focus is emerging that bodes well for M&A dynamics in 2025.