Marketplace - Q1 dealmaking takes a dive

Episode Date: April 2, 2025

Corporate dealmakers hoped merger and acquisition ventures would heat up this year. But the first quarter of 2025 saw the slowest M&A activity in more than a decade, according to Dealogic. In this episode, why firms aren’t shelling out billions to buy another company in this economy. Plus: Nintendo announces a new Switch console, Gen Z suffers in a low-hire, low-fire job market, and a new study shows nonwhite bankruptcy filers face a lower likelihood of debt relief.

It's Tariff Day, again. From American Public Media, this is Marketplace. In Washington, D.C., I'm Kimberly Adams in for Kyle Rizdal. It's Wednesday, April 2nd. Good to have you along. President Trump announced a new round of tariffs this afternoon, what he called discounted reciprocal tariffs, but including tax rates ranging from 10 to almost 50 percent on goods coming from America's trading partners. The president also highlighted the 25 percent tax on imported cars and auto parts that's scheduled to kick in just after midnight tonight. on imported cars and auto parts that's scheduled to kick in just after midnight tonight. One of the president's stated goals for all these tariffs is to get more companies to make more products here in the United States.

And to do that, many would need to build new factories and hire a whole lot of people to work in those factories. But are there enough workers with the right skills to fill all those hypothetical new manufacturing jobs? Marketplace's Samantha Fields has more. The US once led the world in manufacturing. These days China does. But Willy Shih at Harvard Business School says we still make plenty of things. We do have a large auto industry. We do do vehicle assembly. So it wouldn't be hard to make even more cars here, he says. The workforce already exists. But there are lots of other things that we don't make much of in the U.S.

Take semiconductor chips. Some of the most advanced packaging in semiconductors requires things like advanced ceramics. We lost those skills, or actually, especially for some of the newer materials, we never developed those skills in the first place. That's true of other high-tech products too, says Ben Armstrong at MIT's Industrial Performance Center. Things like magnets, which are really critical for batteries and other core electronic technologies, we've really lost the capacity to build in the U.S. He says it's possible to build that capacity here, either again or from scratch.

But it takes a long time and it takes really significant investment. Likely from the government and from companies. To recruit and train thousands of workers in new kinds of manufacturing. What they often do is they bring people who are experts from where they're based, often in Asia, and they come to the U. the US to train this new workforce and get them up to speed. This is a years-long process. There is already some infrastructure

for large-scale workforce development, says Arthur Wheaton at Cornell's School of Industrial and Labor Relations. We have unions, a lot of them have apprenticeship programs that are designed already, and partnerships with community colleges across the country have been very beneficial. But he says companies will probably wait until U.S. policy is clear.

The tariffs would need to be in place for an extended period of time with some expectation that they won't change. For companies to feel like it's worth investing in workforce development and for workers to feel like it's worth training for those jobs. I'm Samantha Fields for Marketplace. Wall Street today spent most of the day waiting on and trying to predict the tariff news. We'll have the details when we do the numbers. Staying on the topic of the American workforce, one subset of the population having a tough time of it in the labor market as of late is Generation Z, folks born between 1997 and 2012. According to last month's data from the Bureau of Labor Statistics, the unemployment

rate for Gen Z was 8.3 percent, more than double that of the headline unemployment rate. Connor Sen wrote about Gen Z's job frustrations in Bloomberg the other day. Conor, thanks for joining us. Thanks for having me. So how does Generation Z view this economy? Very poorly. We saw that in November's elections, and they've had a reason to feel negative because not just the same inflation and high interest rates that everybody else has been having to deal with over the past couple of years. But because we're in this labor market, best

characterized as low hiring, low firing, if you're 40 or 50, you might care more about the low firing part. It's like, okay, I have a job, layoffs aren't that high, I'm safe. But if you're in your early 20s, what really matters to you is that hiring rate because you're entering the workforce, trying to move up in your career. And right now, that's just very difficult. So you write that unemployment rates are higher for younger workers right now but is there anything else to suggest that Gen Z is worse off than you know other generations when they first entered the workforce? Higher housing costs and interest rates are probably the big

ones. I would characterize myself as an elder millennial so in the late 2000s, early 2010s, we had a pretty tough too on the job market side, but at least interest rates were low and rents were relatively low, or at least they hadn't gone up like crazy yet and housing prices as well. Whereas now Gen Z has both the low hiring,

the tough labor market plus high costs. So they're getting squeezed on both sides. What in particular makes this labor market so hard for Gen Z to break into? It's because interest rates are so high as the Fed seeks to control inflation, which means that a lot of parts of the economy are frozen and waiting for lower rates or something to pick up. And so if you're a company you might say, well things aren't bad enough for me to have to lay people off, but they're not good enough to make me hire either. And so if you're 21, well, things aren't bad enough for me to have to lay people off, but they're not good enough to make me hire either.

And so if you're 21, 22, looking to get hired, there's just not a lot of demand for you right now. You have the federal government that's been cutting back and there's no reason to think they're gonna be hiring anytime soon. Universities are cutting back. And also there's the looming threat of AI and what that means for workers,

especially in white collar sectors. So maybe companies that ordinarily would have hired might say, well, let's try to figure out a way to do this with AI rather than taking on a 20 something. Now you and I are both elder millennials and we entered the workforce during a pretty tough economic period. People found a way around that. But what are the long term consequences for this group of not being able to find a job right away?

So, to your point, I think because we all went through, not we all, but many of us went through this 10 or 15 years ago, it feels like it's kind of a bad deja vu of knowing that if you don't move up in your career when you're young, it tends to have long-term consequences on your lifetime earning potential. You get more into debt, you're not saving, you're not building networks, you're not getting experience. And so it really is a big setback. And it's hard to know exactly right now

what makes things get better, certainly this year, because I think corporate America came into the year with a lot of optimism about maybe a deregulation tax cut agenda that would be good for growth. And instead it feels like it's uncertainty and tariffs instead. And so there's not really a reason to think that hiring will pick up this year. And so now you're already thinking about 2026 and it's only early April. So if somebody were 22 and said, what should I do? It's hard to say we'll wait for next year,

but that kind of feels like in a lot of ways that's the story for hiring managers. You point out in your piece that when the job market for young workers has looked like this in the past, it's a bit of a warning sign for the broader economy. Why is that? Well, typically young people just sort of feel the trends in the labor market more significantly because they're the ones who, again, most people in their mid-career aren't switching jobs as much and they're kind of more settled. But if you're young, it's often kind of last hired, first fired.

And so if companies aren't hiring, they're not getting in. And if they are trying to lay people off, they might be cutting their youngest least experienced workers who aren't yet providing a lot of value to their companies. And so if that's kind of decision that companies are making, it might say, well, we're trimming a little bit now, but if things get worse, we'll have to do bigger cuts later. So if we're in that kind of trimming the young people now, you worry about what would the next leg down look like for workers more generally. Connor Sen is a columnist for Bloomberg. Thank you very much.

Thanks for having me. While some spent today waiting to see what President Trump had to say about tariffs, gamers had their eye on a different, hyped-up announcement. Japanese gaming giant Nintendo unveiled details about its new Switch 2, the successor to the now eight-year-old Nintendo Switch, which is among the best-selling video game consoles of all time. The Switch 2's release is set for June 5th, and there's a lot riding on the rollout. Marketplace's Savannah Peters has more. This time five years ago, Nintendo was having a moment.

The company's profits tripled between March and September of 2020. We saw a massive influx of new players, hours and dollars into gaming. Matt Piscitella, an analyst at the research group, Circana, says Nintendo and other gaming companies have held on to most of those players, but they've got a lot more competition for their hours and dollars now that we can, you know, go outside. Getting back to that growth has been a big priority and a big challenge. So the industry is looking for a jumpstart. This morning's hour-long video preview of the Switch 2 shows off new video chat and

game sharing features. Introducing Game Chat, a new feature for you. Audrey Chi-Reed, an analyst at Forrester, says the industry wants us to think of gaming as social. It's about entertainment, not just for yourself, but how you can share that experience with your friends and with your family. And turn the people around you into gamers who will also spend money on new titles and consoles. Like a lot of money. The announced price point of $450 is, I think, pretty rich. Joost van Drunen, a video game expert at NYU, was predicting more like $400 for the new

Switch. If you were hoping we'd get through one story without saying the T word, it's time to cover your ears. I think that that has to do with tariffs. The Switch, like other major gaming consoles, is manufactured in China. Van Drunen says the higher price tag won't keep diehards from standing in line on release day, but it could put off the more casual gamers the industry is really trying to reach. I'm Savannah Peters for Marketplace. In the last few years, American companies haven't had much of an appetite for mergers

and acquisitions. The latest tariffs are just part of the economic uncertainty American companies have had to manage. We've also had elevated interest rates and the hard line the Biden administration took against deals it argued would reduce competition. Dealmakers had hoped that 2025 would be the year that M&A finally roared back, but so far, not so much.

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 Deal Logic. Marketplace's Justin Ho looked into why deal makers are still holding off. Justin Ho Shelling out millions, if not billions of dollars to buy another company can be an extremely risky move. Drew Pascarella, who teaches finance at Cornell University, says for one, the companies might find out they have bad chemistry. In M&A, you're taking on something that you don't really fully understand. At the time you've

acquired it, there are a lot of employees that have not worked under your employee. There's a different culture. There's also the risk that after the companies tie the knot, the broader economy turns south. Pascarella says that's after the companies tie the knot, the broader economy turns south. Pascarello says that's why companies have to be confident that the opportunity to say increase sales or expand a product line through a merger or acquisition is worth the risks. But if that sort of 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 It becomes lessened

Problem is this year figuring out what tomorrow is gonna look like has not been easy For instance look at how volatile the stock market spend day to day Pascorella says 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 And then of course, there's all of the uncertainty around tariffs You know if I'm gonna buy let's say a company and I suddenly see that it's selling products in Jurisdictions that are going to impose tariffs on those products, that the value of that company is going to go down.

That's Afrah Afsharipour, a law professor at UC Davis. She says 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 it coming from the UK. 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. Afshar report says 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 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, 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. John Bai, a finance professor at Northeastern University, says 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.

So from the acquiring firms perspective, if they spot a inefficiently managed firm, they know they can do something with it. 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. I'm Justin Ho from Arcadplace. Coming up. There is no benefit to a Chapter 13 trustee to dismissing a case. Getting debt relief is harder for some than for others. But first, let's do the numbers.

Markets ended up ahead of the president's tariff announcement this afternoon, although futures dropped as the details started coming out, but the Dow Jones industrial average finished up 235 points, 6 tenths percent, to close at 42,225. The Nasdaq was up 151 points, 9 tenths percent, to finish at 17,601. And the S&P 500 rose 37 points7 percent to end at 56.70. Tesla's quarterly earnings showed the effect of the ongoing backlash against Elon Musk, including a 13 percent drop in deliveries worldwide. But the share price ticked up on reports Musk might leave his post in Trump's administration.

Tesla grew five-and- five and three tenths percent. Bonds rose. The yield on the 10-year T-note fell to 4.12 percent, and you are listening to Marketplace. This is Marketplace. I'm Kimberly Adams. The Doge-led downsizing of the federal government continues, and earlier this week, thousands of workers at the Department of Health and Human Services suddenly found themselves unemployed. The layoffs reportedly include about 20 employees who oversaw a program called the Low Income Home Energy Assistance Program,

or LIHEAP, which provides money to states, territories, and tribes so they can help families keep their homes warm or cool, depending on the season. Marketplace's Henry Epp reports officials are now worried about that program's future. Congress appropriated about $4 billion for LIHEAP this fiscal year.

Every state, tribe, and territory gets a set amount, says Mark Wolf, head of the National Energy Assistance Directors Association, or NIAIDA. That depends on several factors, including climate. So a state that's extremely cold will receive more money than, say, a state that's more moderate in its temperature. Same thing with a state that becomes extremely hot.

In many states, people who qualify for LIHEAP apply for assistance through local nonprofits. And then we request money from the state, and the state issues payment to us, and we in turn make those payments to utility vendors primarily. Jean Logan is the executive director of the Community Action Agency of Siouxland in Sioux City, Iowa. LIHEAP recipients end up with a credit that offsets part or all of the utility bill for heating or cooling their home. Logan says it can be a financial lifeline.

It makes the difference between whether or not people have their medicines and they fall behind on their other bills, whether or not people have their medicines and they fall behind on their other bills, whether or not they even eat. So a lot of the day-to-day work of LIHEAP happens at the state and local level, but federal administrators play a crucial role, says Mark Wolfe at NEADA. There is no way to allocate the funds without the federal staff. There's no way to oversee the program. Wolf says there's still nearly $400 million appropriated by Congress for this year that

has not yet been distributed. The Department of Health and Human Services did not respond to a request for comment. In Minnesota, Lyssa Polish at the state's Division of Energy Resources says if those funds don't get released. In very real terms, this means that potentially thousands of households won't be able to get the energy assistance that they need to pay their energy bills. And it's still winter heating season in Minnesota. Temperatures in the Twin Cities today are only in the 30s. I'm Henriette for Marketplace. We were talking earlier in the show about the economic conditions creating a rough go of it for younger workers, many of whom are relying on debt to get by. And debt can pretty

easily spiral out of control. Last year, more than a million US households filed for bankruptcy. And while entering bankruptcy can be painful and leave a lasting financial scar, it's often a needed last resort for people trapped in a cycle of debt. But that scar can be more severe for some than others. A recent study in the National Bureau of Economic Research found that non-white households who file for a common bankruptcy protection

were significantly more likely than white filers to have their case dismissed without any debt relief. Marketplace's Matt Levin looks at the causes and consequences of racial bias and bankruptcy. North Carolina bankruptcy attorney Ed Bolt says he's never really seen overt racial bias from judges or other officials in his bankruptcy cases. But he has seen some instances where his black clients seem to get more questions about what they're spending money on. I have had, at our firm, an experience

where there was a black woman who was driving a BMW, or maybe it was a Mercedes, and that was problematic. Of course, driving a BMW while petitioning for bankruptcy naturally raises eyebrows, but Bolz had plenty of white clients at similar income levels, where nice cars seemed like less of an issue. It did start to feel like there was a little bit like, well, why are you driving this car? And we had other people where they weren't getting the same pushback. For individuals, the two most common flavors of bankruptcy are Chapter 7, which is mostly

lower income debtors without major assets like cars and homes, and Chapter 13, which is designed to help protect those assets via a payment plan. Sasha Ndarte is a finance professor at the University of Pennsylvania's Wharton School and co-author of that new study. Sasha Ndarte So when we look at Chapter 13, which is about 30% of consumer bankruptcy cases, we see that minority filers are 13 percentage points more likely to be dismissed, meaning that they're denied debt relief. Meaning their debt is not forgiven.

When the study controls for other characteristics like income level or whether a filer hires an attorney, the racial disparity narrows to three and a half percentage points. But Indarte says that's still meaningful, and it's not just the race of the person going through bankruptcy that matters. We found that the race of the legal officials that they interact with in the bankruptcy process, that can be predictive of success in their bankruptcy case.

Aaron Ross Powell Meaning whether their debts are eventually forgiven. Lon Jenkins doesn't really buy the study's conclusions. He's head of the National Association of Chapter 13 Trustees. Trustees are basically the legal administrators for bankruptcies. Most of them are white, and they have a lot of discretion over when to tell a judge that someone is missing their bankruptcy payments. There is no benefit to a Chapter 13 trustee to dismissing a case. Trustees make their money from a percentage of the payments made during bankruptcy,

so there's no financial incentive for trustees to recommend denying bankruptcy protection. Jenkins says most of the time his staff tracking late payments isn't even aware of a filers race. He argues it's not that trustees are explicitly or implicitly biased. There are systemic factors that may make minority debtors more likely to miss a payment. Individuals who are in those minority categories typically earn less, typically have less family wealth, and certainly have fewer safety nets if something goes awry. It's important to remember here the whole point of bankruptcy, forgiving some debt that otherwise borrowers would have very little hope of ever paying off. Elizabeth Gonzales is a consumer attorney for the nonprofit law firm Public Council.

So bankruptcy for those individuals is a way to have that lifeline. That I don't have to worry about my wages being garnished or my bank account being levied or frankly just being hounded by creditors. Compared to unsuccessful bankruptcy filers, studies show people who get debt relief through the courts not only have higher incomes in the future, their children will have higher incomes when they're adults. I'm Matt Levin for Marketplace. This final note on the way out today, many Americans have been trying to get ahead of

President Trump's tariffs by stockpiling things they suspect might get more expensive or making big purchases before they get even pricier. A survey from CNET found 38% of U.S. shoppers felt pressured to buy something in advance of potential tariff price increases, especially electronics like smartphones, laptops, and home appliances. Our media production team includes Brian Allison, Jake Cherry, Jessen Duller, Drew Jostad, Gary O'Keefe, Charlton Thorpe, Juan Carlos Serrato, and Becca Weinman. Jeff Peters is the manager of media production,

and I'm Kimberly Adams. We'll be back tomorrow, everybody. This is APM. If there's one thing we know about social media, it's that misinformation is everywhere, especially when it comes to personal finance. Financially Inclined from Marketplace is a podcast you can trust to help you get serious about your money so you can build a life you've always dreamed of.

I'm the host, Janelia Espinal, and each week I ask experts important money questions, like how to negotiate job offers, how to choose a college that you can afford, and how to talk about money with friends and family. Listen to Financially Inclined wherever you get your podcasts.