As we step into Q4 2025, the middle-market mergers and acquisitions (M&A) landscape remains surprisingly stagnant, despite widespread predictions of a significant boom.
In a recent analysis by investment banker Michael Mufson, featured on Crunchbase News, questions arise about whether the Federal Reserve’s recent interest rate cuts will be the catalyst needed to balance capital supply with deal demand.
Understanding the Middle-Market M&A Stagnation
The middle-market, often defined as companies with revenues between $10 million and $1 billion, has historically been a critical driver of economic growth, yet deal activity has lagged behind expectations this year.
High borrowing costs over the past few years, driven by elevated interest rates, have deterred many potential buyers and sellers, creating a bottleneck in market liquidity.
Historical Context: The Impact of Interest Rates on M&A
Looking back, the period of near-zero interest rates in the early 2020s saw a surge in M&A activity as cheap capital fueled aggressive deal-making across sectors.
However, as the Fed tightened monetary policy to combat inflation in 2022 and 2023, the cost of financing deals skyrocketed, sidelining many middle-market players and stalling transactions.
The Fed’s Recent Move and Market Reactions
The Fed’s decision to cut rates by 25 basis points in September 2025, bringing the target range to 4.00%-4.25%, has sparked cautious optimism among investors and dealmakers.
While this reduction lowers borrowing costs, Mufson warns that it may not be sufficient to fully restore confidence, especially with lingering concerns about labor market softness and persistent inflation.
Broader Economic Impacts and Future Outlook
Beyond M&A, the rate cut is expected to influence broader financial markets, with increased liquidity potentially driving investments into riskier assets like stocks and cryptocurrencies.
Looking ahead, if the Fed signals additional cuts in the coming months, as suggested by recent reports, we could see a gradual thawing of the middle-market M&A freeze by mid-2026.
However, external factors such as geopolitical tensions and tariff uncertainties, as highlighted in Mufson’s prior analyses, could continue to weigh on investor sentiment and delay the anticipated deal boom.
For now, stakeholders in the middle-market space are left waiting, watching closely to see if these monetary policy shifts will finally unlock the long-awaited wave of transactions.
Maria Lourdes
