A global trade war kicked off by U.S. President Donald Trump and the ensuing market turmoil soured bankers' predictions for a robust start to a blockbuster year for deals on Wall Street.
First-quarter mergers and acquisitions volume rose 12.6% to $984.38 billion from year-ago period, Dealogic data compiled for Reuters showed. This was due almost entirely to the Asia Pacific region where three large state-run deals announced by China on Sunday and a ports deal driven by Trump helped nearly double M&A volume from last year.
Bankers worldwide are paring back deals and generating less revenue. In the U.S., which accounts for almost half of global M&A transactions, first-quarter volume slipped 13% to $436.56 billion. And while IPO activity increased, a prolonged trade war will make it less palatable in the future, said Matt Witheiler of Wellington Private Investments.
"Could they go public? Sure anybody can go public at any time, if the fundamentals are good. But is it worth the brain damage and potential price that you go public at? Probably not," Witheiler said.
New stock offerings rose about 4.1% to $160.22 billion, but some recent initial public offerings have failed to impress and the number of offerings fell 17.7% to 1,065 according to Dealogic data.
"A lot of the deals that were announced in the first quarter were generated last year at a time when there was increasing exuberance with a potentially new administration in the U.S., with the expectation of tax cuts and deregulation," said Cassander Verwey, JPMorgan's co-head of M&A in Europe, the Middle East and Africa.
"Given the developments over the last weeks the reality is that exuberance has left the market and more uncertainty has creeped in."
Wall Street executives and analysts had predicted a b, expecting Trump to slash regulations, lower taxes and enact more pro-business policies. But U.S. stocks have fallen sharply since his inauguration, and the hoped-for scenario looks less likely by the day, analysts and dealmakers said.
Verwey said M&A markets need confidence and some potential deals were abandoned because of the uncertainty.
Bankers fear a three-year slowdown in deals will drag on. Globally, investment banking fees through Wednesday fell 4.9% to $21.47 billion from the year-ago period, the Dealogic data showed. The deal total for 2025 has fallen 25% to 7,629, a 20-year low. Analysts have already started trimming first-quarter earnings forecasts for some of the biggest banks that advise on M&A deals.
"There's probably a bit more caution if you've got significant tariff exposure with regards to either launching a process or frankly executing a transaction," said Jens Welter, who heads North American investment banking coverage at Citi.
Some Wall Street banks are positioning for job cuts if M&A activity does not rebound or at least improve in the coming months, analysts and recruiters told Reuters.
Still, there is reason for optimism.
Google's $32 billion acquisition of cloud security company Wiz, the quarter's biggest, came together largely because of Trump. The deal was sidelined last year over fears it would not survive the Biden administration's antitrust scrutiny, but those close to the deal believed the odds of approval would improve under Trump, Reuters reported.
"There is still a great deal of liquidity in the market between both sponsors and strategics, as well as a desire to put cash to work. There is also pent-up demand from a few slower years of M&A," said Ivan Farman, co-head of global M&A at Bank of America.
"We were a little more cautious before March but after the activity we've seen in the last few weeks we're more optimistic."
A burst of megadeals in March and hot Asia Pacific IPO activity saved the industry from a moribund quarter. Deal volume in Asia surged 92% to $264.46 billion from the year-ago period, thanks in a large part to the state-run deals in China and Hong Kong-based CK Hutchison's $19.2 billion sale of ports, including those near the Panama Canal, to a BlackRock-led (BLK.N) group of investors.
That deal, however, appeared less solid after reports surfaced on Friday that it will not get signed as planned this week, due to pressure from Beijing. The three acquisitions announced by China's Ministry of Finance on Sunday also accounted for more than $55 billion, combined.
Big European deals helped boost activity 7% from a year earlier to $190.18 billion, including Banca Monte dei Paschi di Siena's $13.8 billion bid for Mediobanca. The deal total for Europe, however, fell 32% from a year earlier to 2,647.
Stalled deals activity led Jefferies (JEF.N) on Wednesday to miss first-quarter earnings estimates. The investment bank's revenue from equity underwriting declined 39%, foreshadowing what may be in store when larger rivals Morgan Stanley (MS.N), Goldman and JPMorgan Chase (JPM.N), report results next month.
Last year's "momentum has been slowed by the uncertainty that has arisen as a result of the policy statements and actions of the government and geopolitical events," Jefferies President Brian Friedman said in an interview.
VOLATILITY THREAT TO IPOS
Since Trump's January 20 inauguration, the S&P 500 is down more than 6% and the tech-heavy Nasdaq 100 has fallen more than 10% through Monday's close, LSEG data showed. This dampened optimism for 2025 IPOs after many companies waited for years to go public.
"Issuers and investors would both like certainty," said Keith Canton, JPMorgan's head of Americas equity capital markets. "Then they can understand how business models will be impacted and then they can start to price equity appropriately."
Two major IPOs, by liquefied natural gas exporter Venture Global and artificial intelligence startup, largely drove volumes in the quarter, but their performance has been disappointing.
Venture Global shares have tumbled nearly 60% since it went public, erasing about $33 billion in value. CoreWeave's highly anticipated debut on Friday also fell short of expectations, with the stock falling more than 7% below its IPO price. This sent a chill through the IPO pipeline and raised concerns about weakening sentiment toward AI infrastructure.
"If you put the combination of tariffs and overall economic uncertainty together, it makes it harder as a management team to have real comfort in the trajectory of your own business and your ability to perform in those critical first few quarters post-IPO," said Robert Stowe, head of Americas equity capital markets at Barclays.
Some European companies have delayed IPO plans. German pharmaceutical company Stada postponed going public in Frankfurt last week because of market volatility. German bank OLB, another IPO candidate, opted instead to sell itself this month to French banking group Credit Mutuel Alliance Federale.
"There have been some big and successful deals that have happened in the last 12 months," said Martin Thorneycroft, global co-head of equity capital markets at Morgan Stanley.
"They're still relatively few and far between, and I think there are quite a few issuers who would want to see a bit more proof in the pudding."
