Companies haven’t had much of an appetite for mergers and acquisitions over the last few years. Some of that was down to an uncertain economy, elevated interest rates and the hard line the Biden administration took against deals that it argued would reduce competition.

Dealmakers had hoped that 2025 would be the year that M&A finally roared back. But so far, that hasn’t happened. The first quarter of this year was the slowest in more than a decade when it comes to mergers and acquisitions, according to the research company Dealogic.

Shelling out billions of dollars to buy another company can be an extremely risky move. Drew Pascarella, who teaches finance at Cornell University, said for one, the companies might find out they have bad chemistry.

“In M&A, you’re taking on something you don’t really fully understand, at the time you’ve acquired it,” Pascarella said. “There are a lot of employees that have not worked under your employ, there’s a different culture.”

There’s also the risk that after the companies tie the knot, the broader economy turns south. Pascarella said that’s why companies have to be confident that the opportunity to increase sales or expand a product line through a merger or acquisition, for example, is worth the risks.

“But if that opportunity is a little bit murkier, if you don’t exactly know what tomorrow is going to look like, your desire to take on those downside risks becomes lessened,” Pascarella said.

Problem is, figuring out what tomorrow’s going to look like this year has not been easy. For instance, the stock market has been volatile day-to-day. Pascarella said that’s made it harder for companies to agree on purchase prices.

“If you think a stock is worth $100, and you make an offer for $100, and the stock drops to $80, or goes up to $120, that conversation becomes a lot more difficult,” Pascarella said.

And then, of course, there’s all of the uncertainty around tariffs.

“If I’m going to buy a company, and I suddenly see that it’s selling products in jurisdictions that are going to impose tariffs on those products, then the value of that company is going to come down,” said Afra Afsharipour, a law professor at University of California, Davis.

Afsharipour said countries might respond to the Trump administration’s tariffs by cracking down on M&A deals.

“You could see this coming from Canada, you could see this coming from the UK,” Afsharipour said. “There are a lot of other regulatory tools that other jurisdictions have as well that will sometimes have an impact on M&A deals, even if it’s two large U.S. companies.”

Afsharipour said the regulatory situation in the U.S. isn’t clear, either. In February, the Trump administration said it’s holding on to the Biden administration’s 2023 merger guidelines, which call for a stricter look at deals that could reduce competition.

But then, in March, President Trump fired two Democratic members of the Federal Trade Commission, which is partially responsible for enforcing those guidelines.

“I think people expected that there would be a lot more regulatory certainty,” Afsharipour said. “And I think that is not bearing out so far.”

As a result, companies that might be interested in making an acquisition are basically just sitting on their hands right now — which might be what U.S. regulators are hoping for.

“A lot of these mergers and acquisitions are actually within the same industry, and these often result in larger market power for a single firm,” said John Bai, a finance professor at Northeastern University.

Bai said on the other hand, a slow M&A market can make the economy less efficient. That’s because companies often buy other firms to try to run them better.

“From the acquiring firm’s perspective, if they spot an inefficiently managed firm, they know they can do something with it,” Bai said. “Is it distribution? Is it brand image building? Is it management practices?”

All of that means less M&A activity could take a chunk out of corporate profits.