Global dealmaking fell to a two-decade low in the first half of 2025 as uncertainty over President Trump’s tariffs weighed on activity. Despite expectations that his pro-business policies would spur an M&A renaissance, deal volume fell 16% year-over-year to 16,663, according to the financial data company Mergermarket.
Business leaders, worried about unpredictable trade policies and the knock-on effects of supply chain disruptions, have been reluctant to move forward with M&A, says Perry Yam, a partner in the corporate transactions practice group at BCLP, a law firm. Thanks to the levies, businesses are struggling to assess the long-term worth of potential targets. “Due diligence processes are becoming increasingly detailed and protracted as a result,” Yam says.
Given the increased complexity of cross-border transactions, due-diligence teams are placing greater emphasis on flexibility and risk mitigation to protect deal value. As businesses adapt, their focus is shifting from simply closing deals to building resilience and agility into every stage of the transaction. Even in turbulent times, opportunities can still be seized.
Light at the end of the tariff tunnel
Despite current challenges, experts predict better times ahead. “There is an expectation that the combination of strong debt markets and falling interest rates could drive an uptick in deal activity after the summer,” Yam says. “The hope is that talk around tariffs will have been exhausted by then.”
Of course, some industries, such as those supplying critical services or those able to shift the tariff burden to customers, have been less affected by the levies. That’s according to Matt Croker, director at Heligan, a UK-based investment bank. “We’re seeing this particularly in the defence sector, where tariff concerns may surface in diligence discussions, but have not dampened North American appetite for high-quality UK assets and have had no impact on deal structure.”
However, sectors with tighter margins, such as automotive, are suffering. Even prior to the latest tariff uncertainty, automotive M&A had been subdued, Croker says. But the added cost pressure has further reduced buyer interest and sapped valuations.
While uncertainty over trade policy is dampening firm’s appetite for certain transactions, Croker is confident the overall M&A landscape is encouraging: “Where tariffs are a factor, companies are adapting by adjusting deal structures to provide workable solutions for both buyers and sellers.”
Deals are still getting done and well-capitalised businesses are eager to pursue commercially favourable opportunities. What’s more, firms that suffered losses from inflation and other macroeconomic factors may view acquisition as their most viable exit path.
With the new EU-US trade deal agreed in July, European businesses will face a 15% levy on most goods exported to the US. Although this rate is more than triple the average 4.8% levy pre ‘liberation day’, for market participants, it’s a sign that uncertainty is receding. The European trade commissioner, Maroš Šefčovič, described the deal as a “breakthrough” in the face of a potential ruinous trade war between the world’s two biggest economies.
What it takes to close a cross-border deal
Businesses pursuing cross-border deals are facing new operational challenges. Tariffs mean more complex customs procedures, sanctions and export controls, while currency fluctuations can erode deal margins and complicate profit repatriation. These factors introduce new layers of legal and compliance risk, along with hidden costs that can escalate quickly if not identified early.
“To manage these risks, companies are conducting more rigorous pre-deal due diligence, including scenario modelling for trade, tax and supply chain impacts,” says Eva Tomlinson, a senior managing director in the export controls, sanctions and trade practice at FTI Consulting. Deal teams must now consider the additional costs of tariffs and trade duties when evaluating a potential acquisition. This can result in revised deal pricing or changes to integration plans to reflect potential impacts, she explains.
When it comes to pricing, Tomlinson says buyers are increasingly working to negotiate terms that allow the final purchase price to be adjusted after the deal is signed, based on conditions such as changes in financial performance. Such agreements help to offset risks that can’t be fully quantified at signing. Firms are also stress-testing whether acquisition targets rely too heavily on goods or components that are vulnerable to tariffs. “This can influence valuations and shift buyer interest toward targets with more diversified or regionalised supply chains,” she says.
Sellers therefore are localising key parts of their supply chain where possible or exploring nearshoring early in the deal process to reduce long-term exposure to trade volatility. Some buyers, meanwhile, are structuring deals to include flexible sourcing or manufacturing options, such as maintaining dual production footprints in the US and Europe to hedge against sudden tariff shifts.
Martin Hartley is the chief commercial officer at Emagine, an international consultancy. He has led 11 cross-border transactions in the past five years. “All businesses should be building resilience into cross-border deals from day one,” he says. “While some transactions benefit from pre-agreed protections, such as price-adjustment clauses, others may opt for the flexibility to renegotiate pricing in response to market changes.”
Protecting margins post-acquisition requires careful management of not only contract terms but also supply lines, logistics and customer relationships. “It is important to plan for a range of possible scenarios and outcomes and ensure legal and commercial teams are aligned, so the business can respond quickly if conditions shift,” he adds.
Advice for CFOs
Finance chiefs planning cross-border transactions in the next 12 to 18 months will want to build as much flexibility into their deal structures as possible. “Deal flexibility is non-negotiable,” Hartley says. “With tariffs, trade rules and regulatory environments shifting constantly, your structures need to allow for contingency planning.”
Hartley also emphasises the value of real-time market intelligence: “Whether it’s emerging sector trends or geopolitical developments, staying informed helps finance leaders anticipate risks and seize opportunities.”
The most successful cross-border deals, he adds, are those where finance, legal, commercial and operational teams collaborate closely. This allows for greater agility, faster decisions and seamless execution.
“Pay more attention to FX swings,” says Henry Allen, group CFO at Caxton, a cross-border payments group. This year has seen the highest spikes in foreign exchange volatility since early 2023 and the dollar index has weakened 10% year-to-date. “This could seriously disrupt a deal and distort prices at either end, should effective hedging solutions and consultation not be taken advantage of,” he warns.
Indeed, engaging trade, tax and customs specialists early in the deal cycle can uncover hidden obligations and help to avoid costly surprises once the deal is closed. Where risks are difficult to price in, Tomlinson suggests CFOs use contingent payments, which link part of the purchase price to future performance or events. This can help manage uncertainty and align incentives.
Crucially, CFOs are responsible for keeping stakeholders informed of evolving risks and mitigation plans. Doing so helps to build confidence with investors, lenders and boards during periods of uncertainty.
The current dealmaking environment, marked by geopolitical unpredictability, warrants caution but not paralysis. Tariffs are reshaping how cross-border transactions unfold, but they are also ushering in a new era of smarter, more resilient dealmaking. For CFOs, success will depend not only on identifying the right targets, but on building the agility to adapt as conditions change.
Global dealmaking fell to a two-decade low in the first half of 2025 as uncertainty over President Trump’s tariffs weighed on activity. Despite expectations that his pro-business policies would spur an M&A renaissance, deal volume fell 16% year-over-year to 16,663, according to the financial data company Mergermarket.
Business leaders, worried about unpredictable trade policies and the knock-on effects of supply chain disruptions, have been reluctant to move forward with M&A, says Perry Yam, a partner in the corporate transactions practice group at BCLP, a law firm. Thanks to the levies, businesses are struggling to assess the long-term worth of potential targets. “Due diligence processes are becoming increasingly detailed and protracted as a result,” Yam says.
Given the increased complexity of cross-border transactions, due-diligence teams are placing greater emphasis on flexibility and risk mitigation to protect deal value. As businesses adapt, their focus is shifting from simply closing deals to building resilience and agility into every stage of the transaction. Even in turbulent times, opportunities can still be seized.
