Dealmaking slowdown threatens early end to M&A boom
Interest rate rises, AI anxiety and midterm elections cool animal spirits after record-breaking start to the year
Global dealmaking fell below $1tn in the third quarter for the first time since Donald Trump unleashed his trade war last year, as high interest rates threaten to derail a blockbuster year for mergers and acquisitions.
Activity dropped to $986bn in the three months to September, marking a sharp fall from the record level of close to $1.7tn in the previous quarter, according to LSEG. The year-on-year decline was more measured, with activity down 13 per cent.
Dealmaking had surged in the first half of the year as companies shook off the uncertainty of the US president’s tariffs and the war in the Middle East. The Trump administration has also spurred activity by lowering antitrust guardrails.
But while M&A had been on track for a record-breaking year before the third-quarter slowdown, the total for 2026 so far of $3.9tn now lags that of 2021, when almost $4.2tn worth of deals were recorded in the first nine months.
“Lower volume, bigger value is even more true this year,” added Lorenzo Corte, global head of transactions at the law firm Skadden. “It’s not a free-for-all and spend all the money you have.”
Among the highest-profile deals of the third quarter were Aon’s $17bn agreement to buy KKR-backed insurance brokerage firm USI, and Uber Technologies’ €13bn move on German food delivery app Delivery Hero.
Former Disney chief executive Bob Iger and investor Josh Kushner, who is the brother of Trump’s son-in-law, also teamed up to strike a $12.5bn deal to buy NBA basketball team the Los Angeles Lakers.
But the economic and political environment has become more challenging for dealmakers. Higher interest rates intended to tame inflation in the wake of the Iran war have made it more difficult to finance large deals, while the rapid rollout of AI is destabilising business models and markets.
The surge in megadeals ushered in by the Trump administration also faltered in the third quarter, with those valued above $10bn slipping to just 10, the lowest quarterly total for nearly two years. In the second quarter, there were 26 such deals.
“Boards and management teams are taking more time to evaluate risks, which has slowed deals down, but they are still inclined to action,” said Aaron Gruber, global co-head of M&A at Cravath, Swaine & Moore.
Several large deals unravelled in the three months to September. Drugmaker AstraZeneca called off a $400bn tie-up with US rival Bristol Myers Squibb, while Honeywell spin-off Solstice Advanced Materials cancelled a $14.5bn cash-and-stock takeover of chemicals company Element Solutions after it was poorly received by investors.
Nonetheless, some argue that despite the relative slowdown over the latest quarter, dealmaking activity remains healthy.
“M&A activity was going up and to the right, so even if it slowed a bit over summer we are still going full throttle,” said Andrew Nussbaum, a partner at New York law firm Wachtell, Lipton, Rosen & Katz. “Despite the execution risks and regulatory complexity, companies want to do deals.”
November’s US midterm elections could shake up the antitrust environment by ushering in Democratic control of one or both houses of Congress. But some said the prospect of a more hawkish regime in the coming years might spur activity before then.
“There’s some amount of desire to seize the moment and do M&A in what’s perceived as a more friendly environment in the US,” said Ian Nussbaum, a partner at Latham & Watkins.
Others added that a period of divided government in the US could speed up activity if it helps to manage the risks facing the economy.
“I don’t see how the midterms are not an accelerant for 2027 going into 2028,” said Raphael Bejarano, global head of investment banking at Jefferies. “There is likely to be an element of split government that could be good in terms of the economy, government intervention and stability.”