The tech industry doesn’t need a booming market to support mergers and acquisitions, but uncertainty creates real friction. While deals can happen in a down market, sustaining strong M&A activity amid unpredictability is far more complicated.
After the venture market dried up in 2022, investors spent years waiting for signs of a rebound. Heading into 2025, there were growing expectations of a turnaround. Late-stage startup valuations had begun to recover, and several high-profile acquisitions suggested M&A momentum was building. Political factors also played a role, with the Trump administration presenting a more business-friendly stance on M&A compared to prior regulatory hurdles under President Biden.
And indeed, Q1 of 2025 delivered. Data showed 205 U.S. startup acquisitions during the first quarter. These included major transactions such as CoreWeave’s $1.7 billion purchase of Weights & Biases, ServiceNow’s $2.9 billion deal for Moveworks, and Google’s $32 billion acquisition of cybersecurity firm Wiz.
Other significant deals included Brookfield’s $1 billion acquisition of proptech company Divvy Homes and Next Insurance’s $2.6 billion sale to Munich Re.
But the landscape shifted dramatically in April. On April 2, dubbed “Liberation Day,” former President Trump announced sweeping tariffs on key trading partners. The announcement spooked investors and sent tech stocks sliding. One week later, a 90-day pause on those tariffs was announced—but the damage was done. The market now sits in limbo.
Industry analysts expressed disappointment. Optimism heading into the year has been replaced with hesitation. The uncertainty, especially around tariffs, has made dealmaking more difficult.
Large public tech firms, typically major acquirers, are particularly exposed. Their stock prices have taken hits, and their supply chains may be directly affected by new trade rules. Even with cash reserves, many are turning to stock buybacks over acquisitions to avoid rattling investors.
A major challenge remains: valuation. The disconnect between inflated 2021 startup valuations and more conservative 2025 expectations leaves a murky middle ground, making it hard for both buyers and sellers to agree on price.
That said, not all M&A activity has halted. Struggling startups unable to raise new funding may turn to acquisitions, even at discounted valuations. Some cash-rich private companies, particularly in AI, are expected to go shopping. One example: OpenAI is rumored to be acquiring Windsurf, an AI code generation startup, for $3 billion following a $40 billion fundraising round in March.
Still, broader uncertainty looms large. Experts warn that the burst of deals in Q1 may be a one-off. If tariffs resume after July, or if trade negotiations remain unclear, the rest of 2025 could continue to disappoint.
Summer is traditionally a slow period for M&A, followed by a fourth-quarter holiday lull. That leaves a narrow window for dealmaking—one that’s shrinking fast.
The outlook now appears more muted than many had hoped just months ago. Constant policy shifts and volatile markets may keep 2025 from delivering the recovery many once anticipated.
