The 2025 Government Shutdown: M&A FAQ’s

Historically, U.S. government shutdowns have had only a limited impact on overall economic growth. While the 2025 shutdown has slowed activity in industries that rely on regulatory approvals, these effects are expected to be short term.
M&A is a long-term strategic decision that typically withstands temporary market disruptions. Buyers should stay aware of near-term challenges, but strong companies with solid fundamentals shouldn’t be passed over because of short-term uncertainty.

In this article, we answer some of the most common M&A questions arising from the 2025 government shutdown.

How is the shutdown affecting M&A deals?

Deal timelines are stretching as key federal agencies pause operations. Regulatory approvals, SBA loans, and some due diligence data sources are stalled. Closings expected in the third quarter may now slip into 2026. The best defense is flexibility: build time buffers and automatic extensions into purchase agreements.

Is deal financing being disrupted?

Yes, especially for smaller acquisitions that rely on SBA 7(a) or 504 loans, which are currently frozen. Larger lenders remain active but cautious.
Buyers should consider other financing sources, such as private equity, seller financing, or non-bank lenders, in case traditional options are delayed.

Which industries are most exposed?

Any business that relies on federal money, approvals, or oversight would be impacted. Diversified companies with private or state-level clients are in a much stronger position to weather the disruption.

• Government contractors and defense: Stop-work orders and delayed payments can strain cash flow for these companies.

• Healthcare: FDA approvals and Medicare reimbursements may slow.

• Infrastructure and construction: Federally funded projects risk suspension.

Shutdowns are, by nature, temporary and past data shows they have limited long-term impact on the economy. Government contracts usually get funded eventually and even enjoy make-up spending spurts. Stay focused on fundamentals as solid businesses retain long-term value.

How are investors reacting?

Most view the shutdown as a temporary disruption, not a market reversal. Deals are still closing, and credit conditions remain stable. But prolonged uncertainty could weaken seller confidence if it drags into next year.

What can independent buyers do right now?

• Extend deal timelines and include automatic shutdown-related extensions.

• Submit regulatory filings early.

• Secure backup financing sources.

• Document diligence gaps and protect with insurance or escrows.

• Stay focused on fundamentals—solid businesses retain long-term value.

Further reading

Do Government Shutdowns Matter to Markets? Morgan Stanley projects that a U.S. government shutdown in 2025 would have only a modest, short-term economic impact, with markets largely remaining resilient.

Explainer: How a U.S. government shutdown could affect financial markets? Markets have historically shrugged off U.S. government shutdowns, but a prolonged shutdown in 2025 could disrupt economic data, regulatory oversight, and increase volatility.

Bottom Line

The shutdown may slow M&A, but it doesn’t stop it. Independent buyers who plan ahead and manage risk will be positioned to capitalize on opportunities once Washington reopens.
If you’re navigating a deal amid the uncertainty, don’t wait for Washington to act. Start preparing your next move now. Contact O’Connell Advisory Group to assess your exposure, refine your deal strategy, and position yourself to move quickly when the market stabilizes.