Introduction: A Promising Start to 2025
Mergers and acquisitions (M&A) don’t require a booming tech market to thrive. Even in downturns, deals can get done—especially when driven by strategic necessity. As 2025 kicked off, optimism returned to the venture capital landscape. Late-stage startup valuations showed signs of recovery, and headline-grabbing acquisitions indicated a potential rebound.
Notably, in Q1 2025, there were 205 U.S. startup acquisitions, signaling renewed M&A interest. High-profile transactions included:
CoreWeave’s $1.7B purchase of Weights & Biases
ServiceNow’s $2.9B acquisition of Moveworks
Google’s massive $32B deal for cybersecurity firm Wiz
Brookfield acquiring Divvy Homes for $1B
Munich Re buying Next Insurance for $2.6B
Momentum seemed to be building. But then, April happened.
The Sudden Shift: How Tariffs Disrupted Momentum
On April 2—dubbed “Liberation Day”—former President Donald Trump announced sweeping tariffs targeting major trade partners. The tech sector’s response was swift and severe: stocks tumbled, confidence wavered, and deal pipelines stalled.
Just a week later, a 90-day pause on the tariffs was introduced. However, the damage to market sentiment had already been done. As one industry expert put it:
“Heading into 2025, people were almost giddy. I don’t think much of that has really materialized.”
— Stellar Tucker, Managing Director, Truist Securities
Understanding Market Volatility and Its Impact on M&A
Stock Price Pressures on Public Acquirers
Many of the most aggressive acquirers in the tech space are publicly traded companies. When stock prices are volatile or depressed, their ability to pursue large acquisitions is compromised. As Kyle Stanford of PitchBook explains:
“Even if they have cash, they don’t want to put it to work in an uncertain market and spook investors.”
In such cases, stock buybacks often take priority over expansionary acquisitions.
Valuation Ambiguity in the Startup Ecosystem
Late-stage startups still grapple with post-2021 valuation hangovers. While some have seen recovery, valuation transparency remains elusive, making it difficult for buyers and sellers to align.
“There’s a lot of back-and-forth leading to significant uncertainty,” said Ronan Kennedy of B Capital.
This foggy valuation landscape contributes to hesitation among both buyers and sellers, stalling deal closures that would otherwise move forward.
M&A Isn’t Dead: Where Deals Still Happen
Distressed Startups Seeking Exits
Some deals are necessity-driven rather than opportunity-led. Startups that have failed to secure funding may now be looking at discounted acquisitions or down rounds.
“They’ve been trying to hold out… If [venture funding] doesn’t come back, those companies are gonna need to get comfortable with acquisitions at discounts,” said attorney Thomas Earnest of Mintz.
This aligns with previous patterns seen in economic downturns, where liquidity pressures create acquisition opportunities.
AI Giants Fueling Strategic Acquisitions
Private AI firms flush with capital—like OpenAI, which recently raised $40B—are still aggressively acquiring talent and technology.
Rumors suggest OpenAI is acquiring AI coding startup Windsurf for $3B, reflecting how well-capitalized firms can navigate market volatility to snap up undervalued assets.
Looking Ahead: The Narrow Window for Deals
Despite the early surge in Q1, experts like PitchBook’s Stanford believe M&A momentum could already be stalling due to April’s market shocks. If tariffs return in July and summer slowdown sets in, the realistic M&A window for 2025 may be razor-thin.
Fall brings further challenges, with holiday season slowdowns on the horizon. As Stanford puts it:
“The prospect of a stable 2025 seems pretty low at this point.”
How Trenzest Helps You Stay Ahead of Tech and M&A Trends
At Trenzest, we stay on top of fast-evolving market shifts so you don’t have to. Whether you’re a tech entrepreneur navigating the startup ecosystem or a marketer watching M&A trends, our resources—like the Tech Insights Blog—keep you informed and ahead of the curve.
Need more than insights? Trenzest also helps startups optimize their positioning for growth, funding, or acquisition. Explore our tools, subscribe to updates, and gain access to valuable market intelligence you won’t find anywhere else.
Final Thoughts
While the first quarter of 2025 offered hope for a robust M&A year, the sudden imposition of tariffs and renewed uncertainty have cast a shadow. Volatility, inconsistent valuations, and geopolitical shifts are all significant headwinds. But for savvy players—especially in AI and distressed startup sectors—there are still opportunities to capitalize on.
Staying informed and agile is key. As always, the most valuable asset in uncertain times is clarity, and that’s exactly what Trenzest aims to provide.
