Bennett Jones lawyer says it is impossible to make full-year predictions with rapid change
Despite early signs of economic turbulence and rising tariff concerns, private equity deal activity held steady in the first quarter of 2025, according to a new report and commentary from Bennett Jones LLP.
Matthew Hunt, a partner at Bennett Jones, says expectations were high at the start of the year, buoyed by anticipated interest rate cuts and the resolution of election-related uncertainty in the United States. While tariff developments outside the US later dimmed that early optimism, he says the data from the first quarter shows a continuation of trends seen throughout 2024 – both in terms of deal count and value.
Several multi-billion-dollar transactions, or “mega-deals,” as Hunt referred to them, even bolstered deal value.
Looking ahead, Hunt says the optimism that marked the beginning of 2025 has tempered but not disappeared. He adds that the expectations for the rest of the year are a combination of structural deal momentum and economic caution.
“There continue to be structural reasons why we can continue to be optimistic on both the sell side and the buy side.”
Hunt says buyers are motivated because they still have excess capital, while sellers are encouraged by the natural maturity of earlier investments.
He says that many investments made during the M&A boom of 2020 and 2021 are now reaching maturity, making 2025 a natural window for exits.
However, given the rapidly shifting macroeconomic landscape, he cautions against making bold predictions for the remainder of the year.
“I do think it's early to provide a view as to what we think the rest of the year is going to look like based on where we are… You could put something out today, and it could change next week.”
While the fundamentals of private equity remain strong, the evolving tariff regime has introduced new considerations.
Hunt says understanding a company’s proximity to tariff exposure will play a key role in transaction strategy.
“I think we need to examine, as surgically as we can, whether companies are squarely within a tariff regime, outside of it, or in close proximity to it. I think buyers and sellers will act according to where they fit in the tariff regime.”
Industries with complex or international supply chains – such as manufacturing and industrials – are expected to face the most significant challenges under the new regime. In contrast, he says that infrastructure-related sectors remain strong, including data centers, electricity, power, and renewables.
Hunt says that some companies are in a gray area regarding tariff exposure. For example, businesses with US headquarters but substantial operations in Canada or those whose manufacturing processes span both countries may find certain divisions more attractive to buyers than others.
While their Canadian operations may represent promising acquisition targets, US-based business components could face more significant regulatory hurdles.
As a result, Hunt says dealmakers are increasingly pursuing M&A opportunities involving specific divisions or components rather than complete business acquisitions. He added that this trend had already begun to play out in the early second quarter.
Despite broader market developments, the core themes of private equity conversations have remained consistent.
Hunt says clients on both sides are still focused on value and execution.
“On the sell side, clients still want to know how to get as many buyers as possible interested in their business. And on the buy side… how they can get the best possible price.”
What has changed, he says, is the timeline. Transactions take longer to initiate and close as parties adopt a more cautious approach while waiting for greater certainty.
“Our pipeline of deals is very strong, but I think people are waiting to pull the trigger on executing LOIs and moving forward to definitive agreements.”
The key variable, the report reads, is how the tariff situation unfolds – and issuing forward guidance will be much easier once there is greater clarity.
“This is much, much easier said than done after the tumult we have seen since early February. But it is the determining factor in moving expectations for 2025 back toward where they were at the start of the year,” it adds.
