M&A update: macro uncertainty weighs on confidence

Clear rationales, cost synergies, and competitive positioning essential for succesful deals

Global M&A activity continued at its near historic record pace with over $1.8 trillion of global deal activity through the first four months of 2026, up 40% year-over-year. April saw continued momentum in several sectors including technology, energy, infrastructure, industrials, and financial services, with AI-related acquisitions and large-scale strategic combinations remaining key drivers of activity.

While broader macro uncertainty and shifting trade policy continue to weigh on corporate confidence, dealmakers appear increasingly willing to move forward on transactions supported by clear strategic rationales, long-term cost synergies, or competitive positioning benefits. Large-cap transactions have been particularly resilient, with several sizeable deals announced or progressing despite ongoing market volatility.

The continued normalization of financing markets alongside improving confidence in the regulatory environment has also contributed to the pickup in activity.

While market volatility and tariff-related uncertainty are likely to continue creating periods of hesitation for dealmakers, particularly for larger multinational transactions, the underlying backdrop for M&A remains constructive. Strategic acquirers continue to seek scale, technology capabilities and supply-chain resiliency, while private equity firms remain under pressure to deploy capital and monetize existing portfolio investments.

We continue to see an attractive opportunity set within small and mid-cap mergers, particularly among domestically focused businesses where financing, regulatory and geopolitical risks are generally lower and acquisition synergies are more straightforward to evaluate.

Outlook

The macroeconomic environment remains increasingly complex as geopolitical instability, elevated fiscal deficits, and persistent inflationary risks continue to cloud the outlook for traditional asset classes.

The ongoing conflict involving Iran and the heightened risk of broader regional escalation have increased uncertainty across global markets. This is particularly relevant given the strategic importance of energy supply routes through the Strait of Hormuz. Even temporary disruptions to shipping flows could place upward pressure on oil prices for an extended period due to long lead times required to normalize global energy supply chains.

At the same time, inflation expectations remain sensitive to higher commodity prices, potentially limiting the ability of central banks to aggressively ease monetary policy despite signs of slowing economic growth. Equity market leadership has also become increasingly concentrated, with a narrow group of AI-related mega-cap stocks driving a disproportionate share of index performance while many non-AI businesses continue to face a far more challenging operating environment.

This bifurcation, combined with historically elevated valuation levels for the S&P 500, leaves broader equity markets vulnerable to periods of heightened volatility should sentiment or earnings expectations shift.

Investment implications

Against this backdrop, we believe investors should increasingly value differentiated, non-correlated sources of return such as merger and SPAC arbitrage. The short-duration, absolute return-oriented profile of the strategy can provide diversification benefits during periods of macro uncertainty while remaining less dependent on the direction of equity markets.

Importantly, the underlying backdrop for both M&A and SPAC arbitrage remains constructive. Strategic and financial buyers continue to pursue acquisitions to drive growth, secure competitive positioning, and deploy substantial pools of available capital, while improving regulatory visibility has supported a steady pickup in announced transactions.

Within SPACs, the combination of attractive yield opportunities, improving sentiment and a growing pipeline of merger announcements continues to create a favourable environment across both new issuance and mature SPAC opportunities.

Amar Pandya, CFA, is Portfolio Manager of the Pender Alternative Arbitrage Fund and the Pender Alternative Special Situations Fund at PenderFund Capital Management. Excerpted from the Pender Alternative Arbitrage Fund, Manager’s Commentary, April 2026. Used with permission.

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