The technology market does not necessarily have to be thriving to support healthy merger and acquisition (M&A) activity, as deals can still be made even in a downturn. However, the question remains as to whether M&A can flourish in an uncertain market, which is a more complex issue.

The venture market experienced a decline in 2022, with fundraising and exits slowing down significantly. Since then, venture investors have been waiting for exits, including M&A and initial public offerings (IPOs), to pick up again. Although the past few years have been disappointing, there was reason to be optimistic heading into 2025.

In the lead-up to 2025, late-stage startup valuations began to recover, and a few notable deals suggested that a rebound might be underway. Additionally, the Trump administration’s stance on M&A was seen as more favorable than that of the Biden administration, which had previously blocked several high-profile deals on antitrust grounds.

As expected, deal activity started to pick up at the beginning of 2025. According to data from PitchBook, there were 205 U.S. startup acquisitions in the first quarter alone, with many of them being notable deals.

In March, CoreWeave agreed to acquire Weights & Biases for $1.7 billion. The following week, ServiceNow announced its plans to acquire Moveworks for $2.9 billion. Later that month, Google announced it was buying cybersecurity startup Wiz for $32 billion.

Other notable acquisitions in the first quarter included the sale of proptech company Divvy Homes to Brookfield for $1 billion and the sale of Next Insurance to Munich Re for $2.6 billion.

However, everything changed in April when Donald Trump announced sweeping tariffs against nearly every major trading partner, causing tech stocks to plummet and Q1’s progress to seem like a blip.

A week later, Trump announced a 90-day pause on these tariffs, but the market remains in a state of limbo.

“Heading into 2025, people were almost giddy, thinking things were really going to pick up,” Stellar Tucker, a managing director at Truist Securities, told TechCrunch. “I don’t think much of that has really materialized. The outlook right now is pretty tepid for 2025, which is unfortunate, because I think everyone went into 2025 thinking it was going to be a much better year than the past few that we’ve been suffering through.”

Volatile Valuations

There are several reasons why a volatile or uncertain public market can hinder M&A activity.

One reason is that many of the most active acquirers, large public tech companies, are directly affected by the tariff uncertainty, with their stock prices taking hits and their core products or supply chains facing potential tariff impacts.

“The large public companies are going to have a really tough time with depressed valuations in their stock,” said Kyle Stanford, the director of U.S. venture capital research at PitchBook. “Even if they have cash, they don’t want to put it to work in an uncertain market and spook investors. Stock buybacks are probably something that they look at instead of company purchases.”

Another obstacle is price, as the uncertainty surrounding valuations has lingered for years, with many late-stage startups no longer worth their 2021 valuations, but their current worth is not clear either.

“There’s a lot of back-and-forth leading to significant uncertainty,” said Ronan Kennedy, who leads the capital advisory team for the investment firm B Capital. “Businesses don’t want to make a decision when waiting a few days could have led to a different decision or valuation.”

Not a Total Deal Drought

Despite the slowdown, some deals will still get done.

Thomas Earnest, a partner at the law firm Mintz who focuses on tech fundraising and M&A, told TechCrunch that any company that has put out feelers to sell this year is likely to pause those efforts, which is a stark contrast to his prediction of an uptick in M&A just a few weeks prior.

“The world was a much different place in January than it was in March, and now we’re in a totally different place than we were three weeks ago,” Earnest said. “You’re not going to buy a house if you fear that in a week’s time it’s going to be worth 20 or 30% less than what you paid for it, and I think that really could ring true in the M&A market.”

However, not all M&A is driven by opportunity. Earnest noted that startups unable to raise their next round of funding will still need to pursue acquisitions, likely at lower valuations.

“They’ve probably been trying to hold out for the venture market to come back, and if it doesn’t, then those companies are going to need to get comfortable with either down rounds or acquisitions at discounts,” Earnest said. “I think that you’ll see deal volume there.”

Well-capitalized AI companies that are private and have significant cash reserves are likely to acquire smaller companies, Earnest added. For example, OpenAI, which recently raised a $40 billion funding round, is rumored to be acquiring AI coding startup Windsurf for $3 billion.

As the second quarter unfolds, PitchBook’s Stanford fears that the events of the first few weeks of April may have already derailed M&A activity for the rest of the year. He added that if the tariffs resume in early July or new trade deals are struck in the meantime, it may not matter much.

Stability is unlikely to return until the summer, which is historically a slow period for activity, followed by the fourth quarter and the end-of-year holiday slowdown.

This leaves a narrow window for significant M&A deals to be completed.

“I think the prospect of a stable 2025 seems pretty low at this point, just because of the changes,” Stanford said. “We all know how much the news has changed in the past two weeks, and it really creates a lot of uncertainty.”