A Look Back at 2025 and the Year of Resilience: Trade Policy, Antitrust Overhaul and Post-Pandemic Record Capital Deployment

In the United States, 2025 was a year defined by the need to transact through volatility. M&A participants repeatedly found themselves scrambling to absorb external shocks, re-price risk and continue pressing ahead. Buyers, sellers and their advisers contended with abrupt and frequent changes in trade policy, the commencement of a more demanding antitrust filing regime and the intensifying impact of artificial intelligence on traditional software services companies. Yet by year end, the market had demonstrated a familiar truth: strong assets still cleared, sophisticated buyers still found ways to deploy capital and resilient deal processes still produced satisfactory outcomes.

Trade policy was one of the most important headwinds. The most acute pause came in early April 2025, when the administration suddenly expanded the scope of tariff exposure for businesses with international sourcing, manufacturing or distribution footprints. For many live processes, the issue was not merely a macroeconomic concern in the abstract; it was that the announced tariffs could materially alter input costs, working-capital assumptions and margin expectations within the deal perimeter almost overnight. In a meaningful number of situations, buyers slowed due diligence, recalibrated valuation, sought fresh operating cases or temporarily stepped back to reassess the operating cost implications and earnings impact of a rapidly changing tariff environment.

Sponsors also continued to face pressure to generate liquidity from portfolio companies acquired earlier in the cycle. Where exit prospects were uncertain or valuation expectations difficult to reconcile, sponsors increasingly explored alternative transaction structures, including continuation vehicles and other GP-led secondary transactions, to provide liquidity to existing investors while maintaining exposure to high-quality assets expected to benefit from improved market conditions in the future.

Even with those pressures, private equity investors and other control buyers found many attractive opportunities to deploy capital, particularly in very large transactions. By the end of 2025, aggregate private equity deal value had rebounded sharply, powered in substantial part by megadeals, producing one of the strongest years for capital deployment since the 2021 peak.

The new Hart-Scott-Rodino (HSR) filing form took effect in February 2025 and significantly increased the information and document burden associated with reportable transactions. For many transactions, the new form increased preparation demands dramatically, requiring more extensive data gathering and broader co-ordination, particularly for private equity sponsors pursuing large transactions with equity co-investors. Parties could no longer treat HSR preparation as a relatively late-stage administrative workstream. It became a more central element of front-end deal planning, signing and closing timetables and negotiation over regulatory-related covenants.

For transactions involving limited liability companies (LLCs) formed in New York or foreign LLCs authorised to do business in New York, the prospect of the New York LLC Transparency Act compelled more localised diligence and structuring considerations in applicable transactions. Since the New York statute incorporates key Corporate Transparency Act concepts by reference, subsequent developments narrowing the reach of the federal framework have had significant downstream effects on the New York regime. Effective 1 January 2026, the Act applies in a limited way to non-exempt LLCs organised under New York law or formed under the law of a foreign country and authorised to do business in New York, and requires such entities to report certain beneficial ownership information to the New York Department of State within prescribed timeframes. Pre-existing in-scope entities generally have until the end of 2026 to make their initial filing, and newly authorised entities are expected to make the filing within a 30-day window following the filing of their articles of organisation or application for authority to do business in New York. For deal counsel, this means that transactions involving entities with a New York formation or registration nexus require earlier attention to entity chart diligence, beneficial ownership analysis and authorisation-to-do-business questions as part of front-end deal planning.

A Look Forward at 2026 and Another Year of Resilience: Geopolitical Uncertainty, Energy Costs, Trade Policy, Inflation Expectations and Robust Volume

Geopolitical uncertainty and energy costs

Coming into 2026, the prevailing expectation was that M&A activity would accelerate. A significant backlog of 2021-vintage investments are now moving towards the outer range of a typical private equity hold period, and many market participants entered the year expecting that moderating inflation would support additional rate cuts and an even more accommodating financing environment.

Instead, the escalating conflict in the Middle East has introduced another layer of uncertainty into the transaction environment. The concern extends beyond ordinary reluctance to deploy capital in assets with direct exposure to a conflict zone. A substantial share of global oil and petroleum liquids move through the Strait of Hormuz, one of the world’s most critical energy chokepoints. Any sustained disruption or serious threat of disruption can have an outsized effect on global energy pricing. Higher energy prices do not remain confined to oil and gas businesses; they ripple through manufacturing, transportation, logistics, packaging and virtually every energy-intensive or energy price-sensitive supply chain.

For M&A, the consequence may be delayed exits, more extensive due diligence and more aggressive risk allocation for energy-intensive or energy price-sensitive assets. Businesses that were expected to command premium valuations in 2026 may come to market later than originally planned if sellers conclude that current conditions may not support the exit multiples they had underwritten. On the buy side, the current environment may facilitate arguments for more purchase price discipline, more earnouts, more seller notes and more non-pari passu rollover structures designed to bridge uncertainty and ensure that the seller continues to bear an appropriate share of valuation risk. The current environment is also likely to support continued use of minority investments and structured equity products. Where parties remain confident in the long-term prospects of a business but disagree on present valuation, minority investments, preferred equity and other hybrid structures can provide capital and partial liquidity without requiring an immediate full exit in uncertain market conditions.

Trade policy uncertainty but risk-allocation clarity

Trade policy is likely to remain an active source of deal complexity in 2026 even after the Supreme Court’s February 2026 invalidation of the administration’s International Emergency Economic Powers Act (IEEPA)-based tariffs. That ruling was an important development, but it did not eliminate tariff uncertainty. New tariffs under alternative statutory bases were immediately announced, and yet more tariffs may be pursued under additional legal frameworks. Businesses with material supply-chain exposure to tariffs will continue to require more granular underwriting, including a more precise understanding of sourcing alternatives, pricing power, contract pass-through rights and customs strategy.

At the same time, the tariff litigation has produced useful clarity for M&A lawyers and their clients in one crucial respect: tariff refunds and similar contingent rights should not be left to implication. During periods of legal and policy volatility, deal documents should expressly address whether potential tariff refunds sit inside or outside the deal perimeter, who has the economic right to those refunds, who must pursue recovery and for how long, what efforts standard applies and whether pursuit costs can be recouped. In the current environment, these issues are not merely technical drafting; they are material economic risk allocation. Buyers and sellers that address these issues directly are better positioned to avoid future disputes if subsequent court rulings or administrative actions create refund entitlements tied to pre-closing periods.

Monetary policy uncertainty

Expectations of a highly active year for M&A were supported in part by the prospect of further interest rate cuts, driven by improving inflation data and the possibility of more rate-cut-friendly leadership at the Federal Reserve. But that path is less certain if rising energy prices and tariff-induced upward pressure on input costs are not contained. If inflation becomes persistent, the Federal Reserve may be compelled to hold rates steady, or worse, increase interest rates, which would constrain deal activity.

Practitioners should expect the same risk-allocation tools that facilitated transactions during the last period of elevated inflation and interest rate uncertainty to reappear with frequency. For example, portable credit facilities, which are designed to travel with the asset to the next owner, can facilitate good outcomes for buyers and sellers if such credit facilities contain better financing terms than might be available in the current environment. Seller notes with robust liquidity rights can enable sellers to transact at desirable valuations and monetise when the debt financing market improves. The creativity and willingness of M&A participants to deploy these and other solutions will, in many cases, determine whether transactions proceed or stall.

Expectations of robust volume

Assuming the Middle East conflict and the related energy shocks do not materially worsen or persist through the year, and assuming financing costs do not move materially higher, the orientation towards transacting that many buyers and sellers carried into 2026 should reassert itself. There is substantial dry powder, a significant backlog of sponsor-owned assets and too much strategic pressure in too many sectors for the market to remain dormant for long. The most likely outcome is not uniform strength across every asset class, but a robust year for high-quality businesses, particularly where the target has defensible margins, pricing power, technological relevance or a clear pathway to operational value creation.

Sponsor-to-sponsor transactions are also likely to remain an important feature of the market, particularly for assets that have already been developed within a private equity ownership model, where institutional ownership, existing lender relationships and prior diligence processes can make subsequent sponsor acquisitions more straightforward to execute.

Evolving New York employment and restrictive covenant considerations

New York-specific employment law developments may also prove more significant to 2026 transaction structuring than initially anticipated. In February 2026, New York amended the Trapped at Work Act, delaying its effective date to 19 December 2026 and clarifying aspects of its scope, while still preserving meaningful restrictions on certain “employment promissory notes” and similar stay-or-pay arrangements. For acquirors of New York businesses, and especially for transactions that depend on management retention, sign-on awards, relocation packages or other repayment-based compensation mechanics, creative structuring approaches will be required to achieve the buyer’s objectives.

New York courts also remain generally sceptical of non-compete restrictions in the employment context and will enforce them only if they are narrowly tailored to protect legitimate business interests, such as trade secrets or customer goodwill, are reasonable in duration and geographic scope, do not impose undue hardship on the employee and are not injurious to the public.

Recent decisions continue to reinforce that framework, with courts frequently declining to enforce overbroad covenants or limiting enforcement to narrower non-solicitation or confidentiality obligations where a full non-compete is not justified.

Taken together, these developments reinforce that, for New York-based employees, the enforceability of non-compete covenants in particular cannot be assumed and should be analysed with specificity across employment agreements, equity plans and transaction documents. Buyers should expect to focus more heavily on alternative protections, such as appropriately tailored non-solicitation and confidentiality covenants and trade secret safeguards, which are generally more readily enforceable under New York law, and, where appropriate, ensure that any sale-of-business covenants are clearly tied to transferred goodwill and supported by adequate consideration.

AI and Technological Change Will Continue To Drive M&A Participants Into the Marketplace

One of the clearest areas of sustained momentum is the build-out of digital infrastructure and the ecosystem of services businesses that support it. Continued investment in data centres, cloud capacity, connectivity, power and other digital infrastructure has created meaningful opportunities in adjacent business-to-business services segments, including architecture, engineering, electrical and power-related services, security and safety services, and inspection and compliance businesses. Middle-market private equity firms have been particularly active in these spaces, both in acquiring pure-play assets and in pursuing adjacent platforms for which digital infrastructure represents a compelling white-space growth opportunity.

That trend should continue in 2026 and likely beyond. The same is true of AI-driven strategic repositioning. Businesses are not only acquiring technology assets to capture upside from AI; many are doing so defensively, to protect existing software, services or data businesses from AI-enabled disruption. Either way, it is pushing buyers into the market in search of capabilities, products, infrastructure and talent that can help them remain competitive. The scale of opportunity, and in some cases disruption, associated with AI may prove strong enough to sustain meaningful transaction activity even if other parts of the market remain cautious.

AI-related due diligence also has a specifically local overlay. New York City’s Local Law 144 prohibits employers from using automated employment decision tools for hiring or promotion unless the technology tool has been subject to a bias audit within the prior year, certain notices have been given and required disclosures have been made publicly available. Consequently, due diligence on acquisition targets with New York City operations (and particularly for software, HR-tech and data-driven services companies) should extend beyond product capability and expand in scope to include AI use cases and city-specific compliance around hiring and workforce management tools.

Healthcare

Healthcare may also be positioned for a year of significant activity. During the prior administration, private equity investment in the sector faced heightened scrutiny and, in some jurisdictions, additional state-level regulatory friction that either slowed transactions or introduced another layer of review. At the same time, proposals to reduce government welfare spending in 2025 did not create a particularly supportive backdrop for accelerated capital deployment into healthcare businesses that generate a significant portion of their revenue from government-funded healthcare programmes.

In 2026, there are reasons to expect pent-up demand to re-emerge. Long-held healthcare portfolio companies may finally come to market, and capital earmarked for deployment in the sector may begin to find more executable opportunities. As always, healthcare deals will remain highly sensitive to reimbursement, compliance and state-law approval considerations. But for high-quality assets with durable demand characteristics and clear regulatory approval pathways, the sector could become one of the more active segments of the market over the remainder of the year.

In New York, healthcare M&A already operates within a state-specific pre-closing notice regime that can materially affect timing and execution. As supplemented by 2025 Department of Health guidance and expanded reporting mechanics, the regime requires at least 30 days’ prior notice to the Department of Health before closing for certain material transactions involving healthcare entities, including certain acquisitions, mergers, asset sales and changes of control meeting applicable thresholds. In addition, proposed 2026 legislation may further expand disclosure requirements and increase regulatory scrutiny, potentially extending timelines for larger or more complex transactions. For New York healthcare deals, this is a core execution consideration that should be incorporated into front-end deal planning.

Summary

The central theme for 2026 is resilience. The M&A market is grappling with geopolitical instability, energy-price risk, trade-policy uncertainty and the possibility that inflation expectations may remain less settled than many had hoped coming into the year. Each of those issues can affect valuation, financing, timing and the allocation of risk between buyers and sellers. Each also requires more deliberate planning at the front end of a transaction process.

Even so, there continues to be optimism that 2026 can still be a robust year for M&A. There is a large backlog of assets in search of routes to liquidity, significant amounts of capital that need to be deployed and a continuing strategic imperative for businesses to evolve through acquisition, divestiture and partnership. If the existing headwinds do not materially worsen, M&A participants are likely to adapt rather than retreat. In that environment, the most successful deal-makers will be the ones that underwrite uncertainty clearly, allocate risk precisely and stay prepared to move when quality opportunities come to market.