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It would seem nobody can escape the subject of tariffs and their potential impact on the U.S. economy.
That includes the attorneys, investment bankers and companies involved in mergers and acquisitions.
Faegre Drinker Biddle & Reath 2025 M&A Conference, held in Indianapolis earlier this month proved that point.
While subjects like artificial intelligence’s growing role in M&A transactions, cybersecurity and employee stock ownership plans were prominent subjects at the annual event, the looming uncertainty of broadly-applied tariffs and what they could mean for 2025 deals came up during multiple panel discussions.
“We always have geopolitical stuff, and we always have a domestic regulatory environment that affects M&A,” said Trevor Belden, a Faegre Drinker partner.
For the past couple of years, there had been more of a focus on antitrust enforcement and its impact on M&A activity, Belden said.
Since Trump took office in January, tariffs became the dominant economic theme of his administration, with businesses watching to see how tariff rate hikes might impact their bottom line.
The impact has been difficult to pinpoint because the Trump administration’s tariffs have changed often over the past couple of months. Most recently, the U.S. and China have cut the tariffs levied on each other in April, with the U.S. cutting the 145% tax Trump imposed last month to 30%. China agreed to lower its tariff rate on U.S. goods to 10% from 125%. The lower tariff rates took effect on Wednesday.
The Faegre Drinker conference, now in its 12th year, is described by the firm as bringing together nationally recognized leaders in strategic and private equity M&A to discuss M&A market activity, trends and hot-button issues.
Jim Birge, a partner with Faegre Drinker, said usually the conference’s agenda is framed out about four months prior to the event, with it being formalized a couple of months in advance.
This year’s agenda included a session titled “Navigating Deals Through the Recent Waves of Tariffs and Trade Actions.”
Birge said he felt fortunate that he “guessed right” that Trump pursued tariffs the way he said he would.
2025 outlook
Some panelists acknowledged that the market for deals had slowed down before the notion of broad-based tariffs entered the national conversation.
In March, USA Today reported that, even a little less than a month before Trump’s “Liberation Day” tariffs announcement, the pace of U.S. mergers and acquisitions in the first two months of 2025 was the weakest since the 2008-2009 financial crisis with just 1,603 deals signed, making it the slowest open by volume since 2009, Dealogic data showed.
Total deals fell more than 19%, while the total value dropped 29% to $248.78 billion from the first two months last year.
During a conference session on current M&A deal trends and 2025’s outlook, Belden said in the middle market M&A environment, deal volume softened in the second half of 2024.
Zainab Bass, managing director of Carmel-based investment firm Periculum Capital Company, said election years were always tough for M&A activity.
Bass said companies were taking a wait-and-see approach in the latter half of 2024.
Industries that were still seeing some M&A transactions included residential services, HVAC and plumbing companies, Bass noted.
“Everyone wants to buy them,” Bass said.
Belden asked panelists what the M&A mindset was entering 2025, whether there were silver linings in the current market and what they expected for the rest of the year.
Bass said, post-election, there was a lot of M&A activity and general optimism heading into the new year.
Now it’s now more of a wait-and-see approach, although Bass stressed there are enough businesses not directly impacted by tariffs that she still expects 2025 to be a good year overall for deals.
She cautioned that one concern for M&A activity is the time it now takes to close a deal.
Bass said due diligence on mergers and acquisitions is taking longer.
Deals traditionally take seven-to-nine months to complete, Bass said.
“We don’t want it dragging out to 18 months,” she said.
Andrew Sterling, Lacy Diversified Industries’ senior manager of corporate development, said that, in addition to deal volume being down in the last two years, the quality of deals was also lower.
Sterling pointed to power generation and traffic control-related businesses as those that might be active in the current M&A market.
He said there were signals there could be a recession this summer, and he hoped for a quick rebound.
David DeCraene, First Merchant Bank’s managing director, said there were about half as many M&A deal possibilities this year compared to a normal year. He expects deals to be down by the end of the year compared to 2024 numbers.
“I don’t think we will have time to make it up,” DeCraene said.
The more certainty that comes on tariff policy, the faster the market will get back on track, DeCraene said.
International trade
At a later session, panelists discussed the top international trade issues that buyers and sellers should be considering in 2025 when it comes to M&A deals that may impact deal timing, certainty, and valuation.
James Sawyer, a Faegre Drinker partner, also used “uncertainty” to describe the current environment in that realm.
“It’s really hard for our clients to keep up and plan,” Sawyer said, adding, “it all starts with tariffs.”
Sawyer added he hoped the corner had been turned and maybe some deals will be worked out with countries on tariff rates.
Mollie Sitkowski, also a Faegre Drinker partner, ran through a number of Trump’s executive orders related to tariffs for audience members.
Sitkowski said with tariffs, country of origin used to not matter as much as it does currently, with import due diligence and managing trade risk in M&A becoming more important, especially with China.
“It’s going to be a whole new world next year when you’re doing due diligence,” Sitkowski said.
The convergence of artificial intelligence and M&A was a new topic at this year’s conference.
Birge said he thought it was interesting to hear about company buyers who were leaning on AI to find viable targets for acquisitions.
The conference kicked off with a discussion on AI opportunities in mergers and acquisitions that featured Rui Silva, M&A integrations global lead at McKinsey & Company.
Birge said Silva pointed out that AI could reduce the time needed for post-integration efforts after the merger of larger companies, as well as reduce costs and drags on growth.
“AI is going to be a real thing in M&A. It will just take time,” Birge said.•
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