Q1 2025 Takeaways:
Q1 in review
- Equities have had a mixed start, with the S&P 600 down around 9% since the beginning of 2025, while the Persient M&A index posted a gain of 2.4% in that timeframe.
- Middle market M&A volume showed hesitance given the macro-climate, however total transaction value held strong posting approximately a 20% gain compared to the same quarter last year.
- Upper-middle market led the way, with larger middle-market deals highlighting the deal-making space in Q1.
Fed and tariffs
- Optimism early in the quarter gave way to caution as the quarter progressed, raising questions about whether Q1 may represent a high point for 2025.
- The speculation around tariff negotiations has proven unpredictable, prompting companies to delay or pause potential transactions until more visibility gives way.
- The federal reserve kept rates steady in Q1 downgrading projections for economic growth and bumping its inflation projection, something investors and acquirers will keep their eyes on moving forward.
Looking forward
- The market is shifting towards more defensive and selective deals, reflecting a shift in M&A strategy toward scale and long-term positioning amid macro uncertainty.
- As economic clarity improves and interest rate cuts materialize, buyer-seller valuation expectations may begin to align.
