Three high-profile mergers died on the vine last year...

First, Amazon canceled its acquisition of robo-vacuum maker iRobot. The company makes Roombas – smart vacuums that move through your house on their own.

It would have made a great addition to Amazon's line of smart-home products. For one thing, Roombas know a lot about you. They know how many rooms you have in your home, where you put your furniture, and more.

But watchdog groups called the 2022 deal a threat to consumer privacy... and to fair competition. Regulators pushed back on the iRobot deal. And both companies walked away last January.

A second merger met the same fate in March 2024...

That 2022 deal was between airline giants JetBlue and Spirit Airlines. A federal judge blocked the merger over worries that it might hurt low-income flyers – the folks who rely on Spirit Airlines' cheap fares.

Again, regulatory scrutiny proved too strong. Spirit and JetBlue parted ways, and Spirit Airlines went on to file for bankruptcy in November.

But the messiest breakup of all was between two grocery chains...

You might remember the headlines when Kroger tried to buy its longtime rival Albertsons in 2022. Advocacy groups warned that the merger could threaten competition and raise grocery prices.

In February 2024, the Federal Trade Commission ("FTC") filed a lawsuit to block the merger... And then, in December, Albertsons announced a multibillion-dollar lawsuit against Kroger, claiming it hadn't tried hard enough to address regulators' concerns about the merger.

You've likely seen many versions of this story over the past few years.

Businesses agree to merge... They get tangled in red tape... Then, they scrap their deals, sometimes at great expense.

If it seems like a pattern, you're not wrong. We've been living through a dealmaking slump of historic proportions.

But, as I'll explain today, this slump will end in 2025. And a mergers-and-acquisitions (M&A) boom is about to begin...

M&A volume crashed to multiyear lows in 2023. And it's estimated to be even lower in 2024.

Two factors have strangled dealmaking since 2022... rates and regulations.

The latter probably seems self-explanatory. But most folks don't think much about how important interest rates are to the M&A market.

You see, your cash earns a small yield from sitting in the bank. Interest rates determine that yield. The higher the return on cash, the less likely consumers and businesses are to risk putting their cash to work elsewhere.

In other words, higher rates raise the bar for M&A deals. Companies have to get much more selective in rising-interest-rate environments.

But higher rates weren't the only problem. Regulations were the real killer.

We need look no further than the "2023 Merger Guidelines" to see it...

This was a critical U.S. Department of Justice release. It formalized the Biden administration's stance on regulating corporate mergers. And that stance didn't show much love for corporations.

The guidelines broadened the definition of what makes mergers anticompetitive. And they made it easier for the U.S. government to step in and break up new deals.

The regulations worked as intended. M&A activity went into a deep freeze. Take a look...

In the first 11 months of 2023, the number of deals completed in the U.S. plunged to a 10-year low. And that figure continued lower last year.

The Biden administration was successful in its antitrust efforts. You may or may not support that approach. But regardless, as investors, we know one thing for certain – it won't last.

That's because the 2023 Merger Guidelines are an act of financial distortion. And as the policy has aged, it has only gotten more out of whack with economic reality.

See, companies don't merge and acquire each other willy-nilly. M&A deals are incredibly complex.

They only happen when the parties involved believe it makes smart business sense... when there are overwhelming strategic or economic reasons to make a deal. And no amount of legislation can change that fundamental dynamic.

The 2023 Merger Guidelines placed a short-term clamp on the hose. However, the fundamentals that drive M&A haven't changed. And as a result, a bottleneck has formed...

Simply put, pressure is mounting for the M&A megatrend to resume... But companies have been forced to sit on their hands for the past four years.

Today, the pendulum is swinging back. That's because the two problems for M&A are reversing.

First, interest rates are falling. The Federal Reserve began cutting rates last year. We don't know their exact path from here. But everyone agrees that more cuts are coming.

Second, with President Donald Trump's victory, a new political regime of deregulation is in place. Trump did plenty to lower regulation in his first term. And he has promised more of the same in his second.

In short, M&A went into a freeze in recent years. But the cause for the freeze is over now. And with years of backlog, we can expect an M&A boom to begin in 2025.

Good investing,

Sean Michael Cummings