M&A revenues fall as Trump pursues his tariffs. Global deal activity is disappointing
The global trade war started by U.S. president Donald Trump, and the subsequent market turmoil, has shattered bankers' expectations for a strong start to Wall Street deals in 2018.
Dealogic data for the first quarter showed that mergers and purchases volume increased 12.6% from the year-ago period to $984.38 Billion. The Asia Pacific region was largely responsible for this, where three state-run deals announced on Sunday by China and a port deal driven by Trump nearly doubled the M&A volume compared to last year.
Worldwide, banks are reducing deals and revenue. The first quarter volume in the U.S. fell 13%, to $436.56 Billion. This is almost half of all global M&A deals. While IPO activity has increased, a long-term trade war may make it less appealing in the future. This is according to Matt Witheiler, Wellington Private Investments.
"Could the go public?" If the fundamentals of a company are sound, anyone can go public. Is it worth the potential brain damage or price you could pay to go public? "Probably not", Witheiler said.
According to Dealogic, the number of new stock offerings has fallen 17.7% from 1,065 to 160.22 billion. However, some recent initial public offers have not impressed and their value has increased by 4.1%.
Cassander Verwey is JPMorgan's Co-Head of M&A for Europe, Middle East, and Africa. He said that many of the deals announced in the first three months were made last year, when the U.S. was expecting a new administration, and there were expectations of tax cuts and regulatory deregulation.
The market has become more uncertain and less exuberant as a result of recent developments.
Wall Street executives had forecast a banner year in 2025. They expected Trump to cut regulations, lower taxes, and implement more pro-business policy. Analysts and dealmakers say that U.S. stock prices have plummeted since Trump's inauguration. The hoped-for scenario is becoming less and less likely.
Verwey stated that M&A markets require confidence, and some deals have been abandoned due to uncertainty.
Bankers are worried that a three-year deal slowdown will continue. Dealogic's data shows that global investment banking fees fell by 4.9%, to $21.47 Billion, from the previous period. Deal totals for 2025 have fallen by 25% to 7,629 - a 20 year low. Analysts have begun to reduce earnings forecasts in the first quarter for some of these biggest banks who advise on M&A transactions.
Jens Welter is the head of Citi's North American Investment Banking coverage.
Analysts and recruiters have told us that some Wall Street banks are preparing for job cuts in the event of a decline or at least improvement in M&A activity over the next few months.
There is still reason to be optimistic.
Trump was a major factor in the $32 billion deal that Google made to acquire cloud security company Wiz. It is also the largest acquisition for this quarter. Last year, the deal was put on hold because of concerns that it wouldn't survive Biden's antitrust scrutiny. However, those involved in the deal thought the chances of approval would be better under Trump.
There is still a lot of liquidity on the market, both from sponsors and strategics. They also want to use their cash. The market is still dominated by a pent-up desire from the slower M&A years, said Ivan Farman.
"We had been a bit more cautious in March, but now that we have seen the activity over the past few weeks, we are more optimistic."
The industry was saved from a stagnant quarter by a flurry of megadeals and IPOs in Asia Pacific. Deal volume in Asia jumped 92% from a year ago to $264.46 Billion, largely due to state-run deals and CK Hutchison, a Hong Kong company, selling ports near the Panama Canal to a BlackRock led group of investors for $19.2 Billion.
This deal appeared to be less certain after Friday reports that Beijing was putting pressure on the signing of this agreement. China's Ministry of Finance announced three acquisitions on Sunday, totaling more than $55 Billion.
The large European transactions, such as Mediobanca’s $13.8 billion offer for Banca Monte dei Paschi di Siena, helped to boost activity by 7% compared to a year ago. The total number of deals in Europe fell by 32% compared to a year ago, falling to 2,647.
Jefferies missed its first-quarter profit estimates on Wednesday due to stalled deal activity. The investment bank's revenue for equity underwriting fell 39%. This could be a sign of what to expect when bigger rivals Morgan Stanley and Goldman report their results next month.
In an interview, Brian Friedman, President of Jefferies, said that the "momentum" of last year was slowed down by the uncertainty created by policy statements and actions taken by the government as well as geopolitical developments.
VOLATILITY RISK TO IPOS
LSEG data shows that since Trump's January 20, 2017 inauguration, the S&P 500 has dropped more than 6%, and the Nasdaq 100, which is dominated by tech, has fallen more 10%, through Monday's closing. The LSEG data showed that this dampened the optimism for IPOs in 2025 after many companies had waited years to go public.
Keith Canton is the head of equity capital markets for Americas at JPMorgan. Then, they will understand the impact on business models and can price equity accordingly.
Volumes were driven by two major IPOs: liquefied gas exporter Venture Global, and artificial intelligence startup CoreWeave. However, their performance was disappointing.
Venture Global's shares have fallen by nearly 60% since its IPO, wiping out about $33 billion of value. CoreWeave’s much-anticipated debut on Friday was also disappointing, as the stock fell more than 7% under its IPO price. This slowed down the IPO pipeline, and raised concern about a waning interest in AI infrastructure.
Robert Stowe is the head of equity capital markets in America at Barclays. He said that the combination of tariffs with the overall economic uncertainty makes it difficult for management teams to feel confident about the future of their own businesses and the ability to perform during the first critical quarters following an IPO.
IPO plans have been delayed by some European companies. Stada, a German pharmaceutical company, delayed its Frankfurt IPO last week due to market volatility. Another German bank, OLB, which was also a candidate for an IPO, decided to sell to French banking group Credit Mutuel Alliance Federale this month instead.
Martin Thorneycroft is the global co-head for equity capital markets and Morgan Stanley.
"They are still few and far in between. I think that there are quite some issuers that would like to see more proof." (Reporting from Echo Wang in New York, Charlie Conchie, and Anousha Saini in London. Additional reporting by Lananh Nguyen, in New York, and Manya in Bengaluru. Editing by Dawn Kopecki and Anirban, Sen, David Gregorio, and Richard Chang.
(source: Reuters)
