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Through the first half of the year, global merger and acquisition (M&A) activity was up 30% year-over-year with over $1.9 trillion in deal activity. The strong year-to-date performance in M&A volumes shows a striking contrast in the realized deal-flow relative to the perception of M&A activity in the market.
2025 is shaping up to be a strong M&A market with concerns over tariffs, which may have initially dampened the appetite for deals in corporate boardrooms no longer a significant hurdle for acquisitions. This is may be partly due to the fact that the market has had the time to absorb the initial impact from the Liberation Day tariff announcements and view them as a negotiating tactic to get a trade deal signed. But this is also likely driven by dealmakers getting used to shocks in the post-Covid world and using these shocks to their advantage when negotiating a merger.
Our view is that the biggest hurdle for M&A hasn’t been rising interest rates, volatile market conditions, or numerous macro shocks; rather, it has been the regulatory environment, which has undergone a notable shift since the 2024 U.S. election. President Biden signed the executive order in July 2021 “Promoting Competition in the American Economy” that enabled key regulators – the DOJ and FTC – to take an aggressive and hostile approach to regulatory approval for mergers and acquisitions. This had a severe dampening effect on M&A activity with many dealmakers waiting on the sidelines and unwilling to even consider a deal under the former regulatory regime.
While the environment for M&A has had many challenges under the current Trump administration, one area where the administration has been quite supportive has been on the regulatory side with the new leadership at the DOJ and FTC being far less obstructionist and willing to work with companies to negotiate a settlement or divestment in order to get a deal cleared.
We saw evidence of this recently with several large-cap merger deals, including the $14 billion acquisition of Juniper Networks Inc., the $60 billion acquisition of Hess Corporation, and the $36 billion acquisition of ANSYS Inc., receiving all regulatory approvals. Several other deals are receiving an early termination notice from the regulatory waiting period, implying an early closing.
With a more constructive regulatory environment the rumor mill for new M&A deals is firing up and we could be in for an explosive back half of 2025 where years of pent-up M&A potential are unleashed.
Despite a complex macroeconomic backdrop, North American equity markets continued their upward trajectory in June, steadily climbing the proverbial “wall of worry.” Investors appear to be shrugging off mixed economic signals, including tepid growth data, lingering inflationary pressures, and continued tariff rhetoric.
Market leadership remains narrow, driven predominantly by mega-cap tech names in the U.S., while Canadian markets are being buoyed by strength in materials. Despite lobbying efforts, heavy-handed tactics, and rising political pressure from the U.S. administration to cut interest rates as a means to drive growth and reduce borrowing costs, the Fed has held steadfast under Chairman Powell.
With markets at highs, a steady employment rate, and uncertainty on tariff impacts on consumer prices, the Fed continues to take a wait-and-see approach with rates. This environment creates an uncertain path forward for equity and bond markets with the potential for a rise in correlation between these two key asset classes.
We continue to remain highly constructive of the outlook for both merger arbitrage and SPAC arbitrage. The under-the-radar strength of M&A markets this year has provided an attractive deal environment with wide spreads in low-risk deals and upside to closing deals driving higher IRRs.
In addition, more bidding wars are occurring for smaller mergers. With a favorable regulatory environment and excess capital on the side, we could see a pick-up in M&A activity through the end of the year.
Amar Pandya, CFA, is Portfolio Manager of the Pender Alternative Arbitrage Fund and the Pender Alternative Special Situations Fund at PenderFund Capital Management. Excerpted from the Pender Alternative Arbitrage Fund, Manager’s Commentary, June 2025. Used with permission.
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