Over the past five years, M&A activity stalled—and not for a lack of appetite but through a combination of high borrowing costs and regulatory roadblocks.

Between May 2022 and July 2023, the Fed hiked interest rates 11 consecutive times to keep inflation in check. Meanwhile, the Biden administration stifled M&A activity as it adopted a more skeptical stance towards dealmaking.

However, all that changed once President Trump entered office in 2025 as his administration ushered in a wave of deregulation to cut through red tape and revive M&A activity. Meanwhile, the Fed cut rates further last year. 

As a result of the deregulatory push and lower borrowing costs, M&A activity boomed, with the total value of deals $4.5 trillion last year, up from $3.1 trillion in 2024.

And now, it seems that trend will continue well into 2026.

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U.S. merger and acquisition (M&A) activity stalled significantly as a result of the following the Federal Reserve’s aggressive tightening cycle in recent years. The Fed hiked rates 11 times between May 2022 and July 2023, bringing rates from near zero levels to their highest point in more than 20 years.

After holding steady for most of 2024, rates began a downward trajectory in September 2024. This easing continued into 2025, with rates reaching 4.5% before subsequent rounds of cuts in September, October, and December of last year further lowered interest rates to 3.75%, still elevated compared to recent history.

In addition to high interest rates, M&A activity was stifled from Biden-era policies that took a restrictive stance towards consolidation.

This has changed however under the current Trump administration. The current presidency brought in deregulatory policies aimed at cutting through red tape and promoting consolidation across industries.

The effects of this stance have become apparent already, as the Justice Department and the Federal Trade Commission only blocked three mergers in 2025, below the average of six deals during Biden’s term. 

And even though dealmaking slowed earlier in the year amid uncertainty around tariffs, deal flow picked up in the latter half of 2025.

Last year saw the resurgence of M&A activity, with a record 68 transactions worth $10 billion or more being announced. The total value of M&A deals also surged, going from $3.1 trillion in 2024 to over $4.5 trillion. 

Megadeals popped up in various industries. 

In the banking sector, Fifth Third Bancorp (FTIB) acquired regional bank Comerica for an all-stock deal worth $10.9 billion. Meanwhile, gaming giant Electronic Arts went private in a $55 billion-dollar deal.

Consumer staples giant Kimberly-Clark joined the dealmaking spree when it acquired Tylenol creator Kenvue for $40 billion. 

And more recently, Netflix (NFLX) inked a deal worth more than $70 billion to acquire Warner Bros. Discovery’s streaming and studio assets, with Paramount Skydance (PSKY) initiating a hostile takeover in response.

And now, it seems this trend will continue well into 2026. A new Fed chair will be appointed in May, who is expected to continue cutting rates after current chair Jerome Powell led the Fed in cutting rates last year.

Years of pent-up demand, looser restrictions, and cheaper borrowing costs have led to a resurgence of dealmaking activity. 

With interest rates on the decline, companies are eager to acquire once more.

The market as a whole is gearing up for yet another strong year of M&A activity. And investors who can identify potential acquisition targets and strategic acquirers could stand to profit in 2026.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research