Broad macro uncertainty and the implications of U.S. tariffs weighed on private equity M&A this summer. Although M&A activity declined in July, interest rate cuts could provide a significant boost to private equity activity looking ahead.
Public companies aren’t the only ones feeling the squeeze this summer. Private equity (PE) and venture capital entries declined in July, both on a monthly and annual basis, according to data from S&P Global Market Intelligence. Although July’s deals totaled $52.59 billion worldwide, it marked a 7% decline from June and down nearly 30% year-over-year. In addition, the number of deals made shrank, falling from 1,103 in June to 911 in July and a steeper drop from July 2024’s 1,232.
“Today’s more complex and unpredictable market presents dealmakers with a far less forgiving backdrop,” said Brian Levy, global deals industries leader at PwC, in a first-half global M&A review. “The result is an M&A environment in which elevated levels of uncertainty are not only pervasive but also structural.”
Caution Abounds as Private Equity M&A Deal-Making Quality Rises
The pullback in dealmaking reflects broader caution from companies and their investment committees according to Michael Mufson, managing partner at Mufson How Hunter & Co LLC. Given the volatility of U.S. trade policy and tariffs, only high-quality companies appeal for the largest private equity acquisitions. “Quality sells and mediocre does not, and that’s the market right now,” Mufson explained to S&P Global.
Unsurprisingly, the largest PE M&A sector in July by aggregate deal value was technology, media, and telecommunications. Over one-third of all deals came from this sector, with industrials (25%), financial (13%), and healthcare (13%) comprising the remaining largest aggregate deals. Given the ongoing dedication to AI by capital markets, tech spending will likely remain a high point for PE M&A.
The deals also reflected a preference for large companies by megafunds. These companies generally demonstrate more reliable performance across economic cycles than their smaller peers. This in turn makes them a less risky acquisition in the current macroeconomic environment. General weakness in the private equity M&A middle market reflected the cautious approach to the higher-risk profiles of small businesses currently.
Where to Look for Opportunity in Private Equity
Despite July’s pullback, global private equity M&A is still up 10% in 2025 compared to the same seven-month period in 2024, measured by transaction value. Looking domestically beyond the megadeals, smaller businesses with less tariff exposure remained attractive in July. These included domestic service-focused industries less impacted by interest rates. And internationally, deal-making activity increased year-over-year in the first-half in both India (up 18%) and the Middle East (13%), according to PwC data.
Should interest rate cuts resume, it could prove a significant catalyst for private equity M&A activity. Many PE firms find themselves sitting on a fair amount of dry powder. In the event of interest rate cuts, deals become more lucrative due to declining costs. This in turn opens the door for firms to use greater leverage in their deal-making, leading to even greater demand potential. Lower rate risk doesn’t solve potential issues related to tariffs, but it may create greater breathing room for firms. All in all, PE M&A activity could surge in a declining rate environment.
The Need for Transformative Business Models a Driver of M&A
And while deal-making quantity may be down slightly for now, the quality of those deals continues to rise. The first half saw a 19% rise in PE M&A deals, with a value over $1 billion, PwC reported as of June 24, 2025. As firms navigate the need for transformation in the ongoing market regime of uncertainty, changing stakes create new risks and new opportunities for firms and investors alike.
“M&A isn’t going away,” said Levy. “It’s a fundamental part of corporate culture and the lifeblood of the private equity (PE) world. Indeed, that same PwC Pulse Survey [May 2025] shows that 51% of US companies are still pursuing deals—a clear sign that transformation and business model reinvention remain a top priority.”
Originally published on Advisor Perspectives
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