Equity and policy analysts forecast a surge in M&A across sectors in 2025, following President-elect Donald Trump's return to the White House, though the outlook for the tech sector is less certain.

A second Trump administration is expected to revise a set of merger guidelines released in December 2023 by the Federal Trade Commission in conjunction with the Antitrust Division of the Department of Justice. The new guidelines lowered the thresholds at which a merger was considered anticompetitive, meaning that a larger number of deals were subject to scrutiny and possibly a regulatory challenge.

While a change in those guidelines would boost M&A more broadly, Vice President-elect JD Vance previously agreed with many of the efforts of current FTC Chair Lina Khan to rein in Big Tech. Vance even suggested there could be a role for Khan in the second Trump administration. As such, major tech companies such as Alphabet Inc., Meta Platforms Inc. and Microsoft Corp. could still see their ability to transact constrained.

"Nobody can say with certainty what the regulatory environment next week will look like, or in January when the players fall into place, so it just introduces more uncertainty into an already uncertain process," said Brenon Daly, research analyst at S&P Global Market Intelligence 451 Research. "And so the natural byproduct of that is hesitance or reluctance, or at least caution."

Macro environment squeezing investors

Several factors have been suppressing tech M&A in recent quarters, including increased regulatory scrutiny and higher interest rates.

The value of global tech transactions announced in October totaled just $23 billion, according to 451 Research's M&A KnowledgeBase. The total represented a month-over-month drop of nearly 70% from $73 billion in September, according to Daly, who noted this ranks among the steepest declines in M&A KnowledgeBase history.

The September spending on tech acquisitions was precipitated by the Federal Reserve lowering its target interest rate by 50 basis points to 4.75% to 5%, the first cut in four years.

"Easing rates and higher multiples will likely stimulate additional M&A activity, particularly since the current backdrop seems more favorable than in the previous two rate cut periods," Baird analysts wrote following the uptick in tech deals in September.

Federal Reserve Chair Jerome Powell announced Nov. 7 that the Fed was lowering its target rate to 4.50%-4.75%, a 25-basis-point-cut.

Asked whether the Fed would make further rate cuts in December, Powell said "I'm not ruling it out or in," and declined to elaborate on whether the Fed would be proactive or reactive to any changes planned by the Trump administration. Trump has promised to impose new tariffs on trade, which could have an inflationary impact.

A Khan question

It is still unknown what role Khan might have going forward. While Vance has voiced support for Khan's scrutiny of Big Tech, Elon Musk's influence on Trump could be a counterweight. Musk posted on X, formerly Twitter Inc., that he expected Khan to be "fired" following a report from the House Committee on Oversight and Accountability that alleged she abused her authority to advance the Biden administration's agenda.

"While some believe Trump/Vance would keep Khan, the growing view of the Street is that Khan would be out at the FTC and this could be a huge catalyst for more deal flow in the Big Tech landscape," said Wedbush Securities analyst Daniel Ives.

Though Musk has yet to be given an official role within the Trump administration, the president-elect previously proposed a government efficiency commission to be headed by Musk.

A Khan exit, though, would not necessarily open the M&A floodgates, at least not immediately. Until or unless the M&A guidelines are revised, dealmakers and advisers will still need to contend with additional layers of due diligence, including submitting more detailed data on market share, competitive dynamics and potential overlaps in product offerings.

"There will be more work involved for the deal lawyers," said Mark Malven, co-leader of the Artificial Intelligence and Innovation Group at Dykema. "Whether or not the administrations had changed, that was going to happen anyway."

Trump on tech

There is some debate among experts about whether Trump will take a friendlier tack toward Big Tech versus President Joe Biden. Looking across the tech, media and telecom sectors, the number of completed M&A deals with a transaction value of over $500 million has stayed relatively constant across the last two administrations.

"If the people now that are going to be reviewing all this information are likely to be more friendly to business, that's certainly a better scenario for these companies than if the election had gone the other way," said Malven.

That said, Trump may exercise his regulatory pressures, said Brian Albrecht, chief economist at the International Center for Law & Economics. Specifically, Trump could attempt to exercise "soft power" and potentially pressure US companies not to acquire Chinese firms, Albrecht said.

Adam Kovacevich, founder and CEO of the progressive tech think tank Chamber of Progress, said Trump is unlikely to abandon antitrust cases against Big Tech companies, including the federal government's attempt to break up Google. The FTC and the DOJ under Biden have been pushing for a breakup of several key aspects of Google, including divestiture of the Chrome web browser and ending licensing agreements that make it the default search engine on Apple Inc. devices.

However, Kovacevich expects behavioral rather than structural remedies, which could open the door to certain M&A transactions.

"He will likely try to use those suits as leverage over the companies to get favorable treatment on speech and content concerns," Kovacevich said. "And his antitrust agencies may shift litigation and remedy strategies in those cases."