Dealmakers Express Optimism About Fed Rate Cuts, But Hope For More

Transactional attorneys are expressing cautious optimism about an increasing demand for work after the Federal Reserve this week trimmed interest rates by a quarter-point, but they are still hoping for further rate cuts from the central bank to spur M&A and private equity deals.

Stocks rose Wednesday following the move by the Fed, which also signalled two additional rate cuts to come before the end of 2025.

“It’s a move in the direction that most dealmakers want to see,” said Joshua Galante, a Stradley Ronon Stevens & Young partner who serves as vice chair of the firm’s emerging companies and venture capital practice. “I guess it’s a question of, have they been anticipating that, and are they anticipating further rate cuts in future meetings?”

Private equity firms, for example, keep an eye on interest rates because when rates go up, and borrowing is more expensive, fewer deals may occur, he said.

For Jay Alicandri, a partner with Dechert’s corporate and securities practice and a leader in the permanent capital and private credit practice, while the market is shifting, the impetus is coming from more than just a quarter-point drop in lending rates.“We’ve got a really good sense from talking to people who run the funds on what is happening. There is absolutely a change in the market,” he said. “So, do I think the lowering of interest rates is going to create this huge boom in PE deals? I don’t, personally. No, I don’t. I do think that what is happening right now is the world of private capital is radically changing.

Private equity still remains somewhat stuck until deals become less expensive, whether that’s some combination of inflation reduction, growth or a further reduction in interest rates, he continued.

“Direct lending is not growing 10, 15% anymore,” he said. “The market is really saturated. That’s a $3 trillion market. Where’s everyone shifting their capital? Asset-backed securities are all the rage now.”

While this week’s interest rate cuts weren’t as much as some folks would have hoped for, if one relies on debt financing to fund acquisitions, the cost of capital is now at least a bit lower, leading to an improved access to capital, said Jonathan Dhanawade, a partner with Mayer Brown’s private equity, mergers and acquisitions practice, who predicted an increase in M&A activity during the balance of the year.

“It’s not going to be a sudden uptick, but a more gradual uptick,” he said.

Other law firm transactional partners are also hopeful for the future.

“We’ve had a pretty busy year, especially in the second and third quarter … and we expect a busy fourth quarter as well,” said Elijah Hammans, a Taft Stettinius & Hollister partner who specializes in private equity transactions, M&A and general corporate matters.

But while many dealmakers welcomed the election of Donald Trump, predicting a more business friendly administration, the president’s embrace of protectionism has caused alarms. The U.S. Supreme Court is set to review the legality of Trump’s tariff regime on Nov. 5.

“There’s total uncertainty,” Galante said. “It could be a long time of true uncertainty as to whether those tariffs remain in place and that does cause a lot of uncertainty for people looking to make deals.”

Reprinted with permission from the September 19th edition of The American Lawyer © 2025 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.