Surging private equity capital and easing interest rates point to strong M&A activity in 2025, but warn that dealmakers face a complex mix of regulatory changes
Despite expectations of a more permissive approach to mergers and acquisitions under new leadership at key regulatory agencies, dealmaking activity in 2025 will be shaped by multiple factors beyond regulatory shifts, according to legal experts.
Changes at the Federal Trade Commission and Department of Justice have sparked optimism about potential easing of regulatory pressures, and banks including JP Morgan and Morgan Stanley have predicted an uptick in deals following a muted 2024.
“The general sentiment is that the regulatory climate and economic conditions, including strong capital markets and high levels of private equity 'dry powder' in 2025 will support a sustained increase in M&A,” said Sonia K. Nijjar, a partner in Skadden's mergers and acquisitions practice based in Palo Alto.
Jamie Leigh, chair of Cooley LLP's global mergers and acquisitions group in San Francisco, said her team was “definitely gearing up and excited for a higher volume deal year.”
There was plenty of talk that the SPAC, or Special Purpose Acquisition Company, was back and there were “some good reverse merger candidates on the market,” Leigh said. However, she added that the rush of artificial intelligence company acquisitions and acqui-hires, the acquisition of companies with the primary aim of gaining access to personnel, was likely over.
The Role of Regulation
The appointment of Andrew Ferguson as FTC chairman and nomination of Gail Slater to lead the DOJ marks a shift from their predecessors. Slater’s appointment is still subject to Senate confirmation. Ferguson's predecessor, Lina Khan, and the previous Assistant Attorney General for the Antitrust Division, Jonathan Kanter, had faced criticism from the business community for their interventionist approach.
“In recent years, M&A transactions have faced a heightened level of regulatory scrutiny, making them more challenging to complete and often extending the timeline from signing to closing,” Nijjar explained.
However, D. Daniel Sokol, a business and law professor at the University of Southern California, argues that enforcement activity under the Biden administration was consistent with prior administrations. “In spite of the narrative, antitrust enforcement has been significant in prior administrations,” he noted.
While added scrutiny has influenced deal-making, other factors play crucial roles.
“I think we over rotate a little bit on the dampening effect of regulatory oversight,” Leigh observed. While regulators “obviously did play a large part in how buyers prioritized targets and ultimately, whether a buyer wanted to sign up to a fight with a regulator,” she said that investors, management teams, buyers and boards were “folks who are going to figure out how to do dealmaking, kind of no matter what the environment, so long as it works well for them.”
Valuation spreads, interest rates and access to capital significantly influence activity, along with sector-specific factors like patent cliffs in life sciences, Leigh said. Many of these factors are showing signs of improvement. “A number of key factors impacting dealmaking had certainly been improving heading into 2025 – we saw interest rates go down, inflation cooling and generally more optimism in boardrooms,” Nijjar said.
Trump's Antitrust Approach Still Taking Shape
Despite expectations of change, the exact nature of antitrust enforcement under the new administration remains unclear.
“Many dealmakers believe that the Trump administration will relax antitrust enforcement compared to the Biden administration, which may provide more certainty that transactions will be completed, but early executive orders have yet to specifically address antitrust enforcement,” Nijjar said.
Sokol suggests enforcement could differ significantly from the first Trump administration. “How overtly political antitrust becomes under Trump remains unclear,” he said. “For the most part, antitrust was spared direct intervention in the first administration but that was because antitrust was a technocratic exercise. Now that the neo-Brandeisians have pushed for antitrust to be more political, this opens the door for an overtly politicalized Trump administration to exert direct influence.”
Justice Louis Brandeis, who sat the U.S. Supreme Court from 1916 to 1939, was a strong advocate for breaking up large corporate monopolies and ensuring economic democracy by limiting concentrated power in both business and finance.
While it remained unclear if Ferguson's FTC would address merger guidelines or revisit recent changes to premerger notification requirements, there was 'pressure' for both to occur, Sokol said.
Another major unknown was whether Humphrey's Executor – a precedent which allows Congress to require presidents to show cause before dismissing board members overseeing independent agencies – would survive under the new administration. President Trump's recent firing of a slew of agency staff presents a key test of that rule.
What seems certain is that the FTC's “attack” on private equity “will become more muted” while “healthcare enforcement, which has been consistently strong since the George W. Bush administration will continue to be a priority,” according to Sokol.
Global Considerations
Even if domestic regulatory approaches change substantially, deals won't necessarily sail through approval. International scrutiny remains significant, particularly from regulators in the U.K. and Europe, Nijjar said.
The Committee on Foreign Investment in the United States will also continue to scrutinize foreign investments in U.S. companies.
“Globally, we're still seeing increased scrutiny from regulators in the U.K. and in Europe, and geopolitical tensions can create uncertainty and make investors more averse to risk,” said Nijjar.
Additionally, new administration policies could reshape deal landscapes. Potential tariffs and protectionist policies could incentivize U.S. companies to divest non-U.S. operations or prompt foreign companies to consider U.S. acquisitions or manufacturing relocations.
-Jack Needham, Daily Journal Associate Editor
The Los Angeles/San Francisco Daily Journal is a publication for lawyers practicing in California, featuring updates on the courts, regulatory changes, the State Bar and the legal community at large.
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