From M&A to AI, how CFOs are mapping out the year ahead

Inflation will still be a focus in the year ahead, as consumers continue to watch their grocery bills, and companies weigh the potential inflationary effects of tariffs and their impact on trading partners including Canada, Mexico and China.

2025 will be a watershed year for artificial intelligence, as companies integrate generative AI into their workflows to a greater degree, including in investor relations departments and earnings preparation.

And with the new Trump administration set to take office, expectations for lower interest rates, measures to curb inflation and a pullback in regulatory scrutiny also have some chief financial officers adjusting their game plans and gearing up for “animal spirits" to provide a tailwind for M&A activity in the coming year.

The Wall Street Journal interviewed some top finance chiefs and analysts about their expectations and plans for the year ahead. These are the main themes CFOs are focusing on:

Leveraging AI

Investments in AI will continue to be a theme, said Don McGuire, the chief financial officer at payroll, HR and tax services company ADP. The company already has embedded various AI tools in its sales processes to help with call preparation, prospect prioritization and coaching, McGuire said.

For sales reps, AI tools can “whisper in their ears," he said. “Things that people used to sit beside you and have a headset, now you can do those things with GenAI tools, and that helps you navigate."

ADP also uses GenAI to prepare for investor days by going over the topics that dozens of clients will talk about and to outline key themes.

“The big difference with GenAI is you can literally go through tens of millions of interactions and really get deep summarization on what’s happening," McGuire said.

“So it’s back to doing more with the same, or doing more with less."

Adapting to tariffs

The threat of tariffs can be expected to ripple through business operations, affecting supply-chain costs and investment priorities, according to Michael Perica, CFO of Rimini Street, an enterprise-software provider.

Key considerations for CFOs will include how to adapt various financial strategies to support supply-chain disruptions. Companies also will need to allocate resources to absorb potential tariff expenses or redirect investments into partnerships with local suppliers to have greater flexibility, Perica said.

In some cases, business projects will be cut as a result of higher tariffs, he forecast.

“We are having conversations as [clients are] prepping for this and what feels like an inevitability, and we are absolutely partnering with folks to help them along and take a look and evaluate what’s a ‘nice-to-have’ project versus ‘got to have,’ " he said.

Interest rates and the U.S. economy

While equities have surged since the election, the bond market has sold off, said Adam Barsky, the CFO at the New York Power Authority. So the Treasury yield curve is getting steeper, meaning that the cost of debt in the 7-10 year range of the curve has gone higher.

“Higher inflation expectations as well as higher federal debt and deficits are bearish for the bond market while there is uncertainty," Barsky said. “Once we see what ultimately happens with tariffs, there will be a reset."

On the U.S. economy, ADP’s McGuire said he sees continued tailwinds helping in terms of growth and the U.S. labor market.

“The U.S. economy does continue to be strong. Unemployment rates and employment participation rates are almost at where they were prepandemic. Things like new business formations, they came back, in the month of September. They continue to be at elevated levels from a historical perspective. The U.S. economy’s pretty resilient and will continue to be so for quite some time," he said.

M&A

Dealmaking has already been picking up, with a steady rise in the volume of deals valued at over $1 billion during the past year, but even more seems likely in 2025 as the Trump administration reconsiders regulatory efforts.

“Between an incoming change administration and a different economic environment, from an industry perspective, you’re going to see that that kind of momentum will continue to 2025," said David Dean, managing director for M&A consulting at consulting firm WTW.

Specific sectors to watch include life sciences, financial services and insurance, Dean said. GenAI also will have a role in M&A activity, according to Dean. “One dimension is companies that are trying to buy AI capabilities in one form or fashion," he noted. Companies also will increasingly use AI to analyze and weigh potential deals, he said.

Whether M&A picks up in 2025 will depend on how much the Federal Reserve cuts rates, however, and exactly which regulatory changes Trump brings, according to Suzanne Kumar, an executive vice president in the global M&A and divestitures practice at consulting giant Bain & Co.

Deal activity in the venture-capital and private-equity sectors will also be a factor, she said. “We still have the sense that the market is idling, and we’re waiting for something to unlock momentum," Kumar said.

Many buyers and sellers remain at odds when it comes to agreeing on a valuation. Higher rates have made financing more expensive than it was several years ago, and have lowered the projected enterprise value of potential targets. Meanwhile, stock-market valuations have risen over the past year, giving sellers confidence to ask for higher prices.

“What is happening is, if sellers have the option to wait, they are," Kumar said.

Kristin Broughton contributed to this article.

Write to Walden Siew at walden.siew@wsj.com