Market Uncertainty Splits M&A by Investment Horizon
The US economy has entered an unsettling phase — characterized by policy uncertainty and short-term disruption. While the current administration continues to pursue pro-business goals of deficit reduction, deregulation, and more equitable trade relations, these moves are creating volatility that many market participants hadn’t fully priced in.
In the mergers and acquisitions world, this new dynamic is playing out along a clear fault line: investment time horizons.
Private equity firms — typically laser-focused on a four-to-five-year hold with defined exit parameters — are taking a cautious stance. In contrast, strategic corporate buyers, with longer-term mandates and greater tolerance for interim volatility, are forging ahead. The result is a bifurcated deal environment, where deal decisions hinge more on strategic outlook than sector or valuation alone.
When Trump won the election, markets responded with a burst of optimism. Deregulation, tax cuts, and a merger-friendly Federal Trade Commission were viewed as clear tailwinds for business. Less widely acknowledged, however, was the tradeoff: realizing the long-term benefits of structural reform would require enduring short-term pain.
As I often tell clients: To make an omelet, you’ve got to break some eggs. What’s becoming clear is that some market participants and business leaders underestimated just how many eggs it might take.
Markets don’t like ambiguity — and uncertainty is now baked into everything from interest rate expectations to global trade. The latest tariff disputes with Canada and Mexico may prove short-lived, but deeper tensions with China are likely to persist.
The resulting uncertainty has forced many private equity firms into a holding pattern. Their playbook depends on precision: the right entry multiple, favorable debt costs, and a clear monetization pathway. When even one of those variables shifts — let alone all three — the math no longer works.
Too often buyers are waiting for higher valuations, which may not be realistic to achieve given current market dynamics, rather than take slightly lower premiums.
Strategic corporate M&A, by contrast, is guided by a different set of considerations. The lens of CEOs is long. They pursue synergies, cost efficiencies, and intangible value that don’t depend on a five-year payoff. Yes, entry price and interest rates matter—but not in the same existential way they do for private equity. For corporations, this remains a reasonably attractive environment to pursue growth, particularly if they believe in the long-term direction of the US economy. And I do.
I am optimistic and bullish on our economy for the long term. If the government can follow through — cut deficits, streamline operations, and bring manufacturing back — we may be laying the groundwork for a more competitive and resilient economy. But that transition will be uneven.
What does all this mean for business leaders? As the CEO of Solomon Partners, I am taking the long-term approach that many of our corporate clients are taking. We’re growing. We’re investing. Like many of our strategic clients, we’re willing to endure the natural ups and downs of an economy in transition because we believe the payoff will come. Flexibility is not a luxury every firm has — but it’s the right move for us, and for any institution playing the long game.
In this climate, dealmakers need to ask themselves: Are you trading for the next quarter — or building for the next decade? That question will define who sits on the sidelines — and who shapes the corporate and dealmaking landscapes in the months ahead.
