Major shifts in US tariff policy have weighed on an anticipated EMEA M&A revival in H1 2025, but with an US-EU tariff agreement now in place, is the outlook improving?

First half on hold

EMEA dealmakers were cautiously optimistic that 2025 would see a rebound in regional M&A activity, with inflation cooling and interest rates coming down, lowering transaction financing costs and making it easier for dealmakers to price risk.

But even though the European Central Bank (ECB) has cut base rates eight times since June 2024, EMEA activity failed to spark through the first half of 2025, with deal volume contracting 19.1% yoy and dropping to 7,816 transactions (a three-year low), and value rising only a marginally by 1.6% yoy to €500bn – lagging deal value growth in the Americas and APAC.

The US “Liberation Day” tariff announcement in April put EMEA dealmakers on the back foot, as corporates and private equity players put transactions on hold to assess the impact of higher tariffs in the US (Europe’s single largest export market) on company earnings and supply chains.

A clearer path ahead

After months of uncertainty for EMEA M&A, the US-EU tariff deal announced at the end of July puts the EMEA M&A market on a much firmer footing for the rest of 2025 and beyond.

The agreement will impose a 15% tariff on most European exports, including vehicles, pharmaceuticals and semiconductors, while most US exports will have zero-tariff access to EU markets, although the exact details of what this means in practice are still to be clarified. The deal also sees the EU commit to increasing its purchases of US energy products by US$750 billion during the next three years, invest a further US$600 billion into the US economy and purchase US military equipment.

The deal has come as a relief for dealmakers, bringing tariffs down from the initial “Liberation Day” levels, providing clarity on the goods subject to tariffs, and, crucially, avoiding the risk of an escalating trans-Atlantic trade war.

The fact that higher tariffs have been imposed on other large exporters into the US also means that, on the whole, EU exporters will not be at a disadvantage to competitors in other jurisdictions, according to J.P. Morgan, with export volumes maintained unless there is a significant and immediate ramp up in US production capacity, or a slowdown in US consumption.

With a more stable picture on trading arrangements with a key export market for EU businesses emerging, investors will have more comfort and confidence to progress M&A transactions.

Opportunities amid complexity

Indeed, in addition to the benefits of greater stability, the US-EU trade framework could stimulate trans-Atlantic cross-border M&A opportunities in new areas. Zero-tariff access to EU markets, for example, could spur US investment appetite for European assets and supply chains, while M&A could be a key channel for the EU to deliver on commitments to purchase US energy and military goods.

The framework is also expected to reshape due diligence and deal execution for EMEA dealmakers, as well as their approach to M&A strategically.

Due diligence processes are expected to take longer and become more granular as prospective acquirers of EMEA assets sift through trade complexities.

Law firm Eversheds-Sutherlands, for example, notes that the framework already includes exemptions from the 15% headline rate for aircraft and plane parts, certain chemicals, generic pharmaceuticals, and some agricultural products, while tariffs on EU steel and aluminium imports will be held at 50%. Further technical negotiations on goods such as alcohol, and specific details on the tariff treatment of pharmaceuticals and semiconductors are also yet to be realized.

As the final points of the trade deal are finalized, dealmakers involved in EMEA transactions will widen due diligence reviews to work through the detail and nuances of the trade arrangement, and what this means for deal target valuations.

The shifting tariff dynamic has also had a wider strategic impact on the strategic reasons for doing deals. The core drivers of M&A, such as geographic expansion, technology upgrades, and earnings growth remain relevant, but Boston Consulting Group notes that M&A is also emerging as an important lever for EMEA investors to adapt to the changing nature of global trade.

Dealmakers will now be screening deal targets that provide domestic capacity in markets where trade barriers are higher. M&A can also help to streamline sprawling global supply chains and mitigate tariff exposure, as well as consolidate sectors where tariffs have intensified cost pressures.

Shifts in tariff policy are reshaping global trade. M&A will be a crucial strategic tool for EMEA corporates as they adapt to changing trading arrangements, while private markets will be seeking new growth opportunities to deploy capital as trade dynamics evolve.