USA – MARYLAND Trends and Developments Contributed by: Michael Hardy, Joseph Machi, Nicholas Stewart and Leen Al-Alami, Duane Morris LLP
include co-lending and sourcing arrangements and offer considerable benefits to all parties involved. A bank can maintain its customer relationship and con - tinue to provide ancillary services, and at the same time reduce its credit exposure by moving assets from its balance sheet to that of the private credit fund, thereby reducing the bank’s capital requirement. The private credit fund in turn can leverage the bank’s network and gain access to a broader range of com - panies and potential transactions. Partnerships like those formed between Citi and Apollo, JPMorgan Chase and Cliffwater, FS Investments and Shenkman Capital Management, PNC and TCW Group, and Wells Fargo and Centerbridge to target direct lending deals are expected to continue. M&A Climate Private equity M&A activity entered 2025 showing early signs of recovery and renewed momentum, though sentiment remains guarded amid ongoing market volatility and policy uncertainty. According to data released by S&P Global Market Intelligence, the global market recorded USD330.25 billion in value across 5,048 private equity transactions in the first five months of 2025, marking a nearly 20% increase in deal value but a 7.5% decrease in deal volume compared to the first five months of 2024. This dis - connect underscores the market’s growing emphasis on higher-quality, scalable assets. Despite persistent headwinds, private equity sponsors – under mount - ing pressure to deploy over USD1 trillion in dry pow - der accumulated in recent years – are cautiously re- entering the dealmaking arena with a focus on resilient assets and disciplined capital deployment. Factors Constraining Dealmaking Activity Dealmaking activity continues to face challenges from persistent macro-economic conditions (namely, elevated inflation and high interest rates), geopolitical While inflation has cooled from its post-pandemic highs, it continues to weigh on the pace and structure of M&A activity. US headline CPI eased to 2.4% as of mid-2025, down from 3.3% in May 2024 and 4.0% in May 2023. Nonetheless, while some believe the impact of tariffs on inflation will be overstated, recent risks and regulatory oversight. Macro-economic conditions
tariff increases have prompted many economists to project that core inflation will rise again, potentially reaching 3.5% to 4% by year-end. Although some businesses continue to absorb the impact, recent Federal Reserve surveys indicate that more than half plan to pass these cost increases on to consumers in the near term. Following 100 basis points of rate cuts since Sep - tember 2024, the Federal Reserve has maintained its benchmark rate at 4.25% to 4.5% through the first half of 2025. Policymakers remain divided on the timing of future adjustments, as they balance persistent infla - tionary pressures with emerging signs of labour market softening. Meanwhile, long-term rates have contin - ued to rise, with ten-year Treasury yields approach - ing 5% – reflecting ongoing inflation concerns and fiscal unpredictability. For private equity sponsors, this environment has made traditional debt financ - ing more expensive and less predictable, prompting a shift towards alternative capital structures to bridge valuation gaps and preserve target returns. Geopolitical risks Geopolitical instability continues to shape the private equity M&A landscape, particularly for cross-border transactions. The Russia–Ukraine war, conflict in the Middle East and strained US–China relations have disrupted global supply chains and introduced add - ed delays and complexity to deal execution. In the USA, the Trump administration’s use of tariffs and its unpredictable trade posture have added a further layer of uncertainty for companies with international exposure. These dynamics have complicated dili - gence processes, hindered the accurate analysis of EBITDA of many targets and extended transaction timelines. In response, many dealmakers are pivoting towards domestic or nearshoring strategies to reduce geopolitical risk and mitigate supply chain disruption. Heightened trade friction has also made cross-border valuation modelling more challenging, leading spon - sors to increasingly incorporate contingent considera - tion provisions and price adjustment mechanisms into deal terms to manage volatility and execution risk. Regulatory oversight Expectations for a more relaxed antitrust environ - ment under President Trump’s second term have not
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