Portugal's M&A Market Drops 30% in First Quarter as Deal-Making Freezes Amid Global Uncertainty

Portugal's mergers and acquisitions market suffered a sharp contraction in the first quarter of 2026, with deal activity falling roughly 30 per cent compared with the same period last year. According to data reported by ECO, the combined M&A, private equity, and venture capital market involving Portuguese companies mobilised approximately €989 million between January and March — a significant decline that reflects the mounting uncertainty gripping Europe's smaller economies.

What is driving the slowdown

The drop did not happen in isolation. Portugal's deal-making environment has been squeezed from multiple directions simultaneously, creating what dealmakers describe as a "wait and see" paralysis.

First, the Strait of Hormuz crisis — now in its second month — has pushed energy costs sharply higher and injected deep uncertainty into any business plan that relies on stable input prices. Diesel in Portugal crossed €2 per litre this week for the first time. For companies considering acquisitions or investments, that kind of cost volatility makes valuation models unreliable and due diligence more complex.

Second, the tariff shock from Washington has cast a shadow over export-facing businesses. With a 20 per cent US tariff on EU goods arriving on 9 April and a separate 15 per cent levy on pharmaceuticals, any Portuguese company with significant American revenue is now a riskier proposition for buyers. The uncertainty extends beyond the tariffs themselves — it is the unpredictability of further escalation that freezes boardroom decisions.

Third, the Bank of Portugal's decision last week to cut its 2026 GDP growth forecast from 2.3 to 1.8 per cent has dampened domestic confidence. A slowing economy typically compresses deal multiples and discourages sellers who believe their companies are worth more than the market is willing to pay.

A global contrast

What makes Portugal's Q1 decline particularly striking is that it runs counter to the global trend. Worldwide, startup and M&A investment hit a record $297 billion in the first quarter, driven overwhelmingly by AI mega-deals in the United States. Portugal, which has no significant AI infrastructure play and remains exposed to the energy-intensive sectors most affected by the current crisis, is on the wrong side of this divergence.

The TAP privatisation process — which narrowed to two bidders this week after IAG walked away — remains the largest single deal on the Portuguese horizon. But even that process has been complicated by the geopolitical environment, with aviation fuel costs surging and route economics shifting as the Hormuz blockade disrupts global jet fuel supply chains.

What to watch

Deal advisers in Lisbon say the pipeline has not disappeared — it has stalled. Several mid-market transactions in real estate, renewable energy, and food processing are reportedly in advanced stages but have been delayed as buyers seek price adjustments to reflect the new risk environment.

If the Hormuz crisis reaches a resolution and tariff clarity emerges after 9 April, a rebound in Q2 is possible. But if the current conditions persist, Portugal risks a full-year decline in corporate investment activity at precisely the moment its economy can least afford one. The €989 million mobilised in Q1, while not negligible, suggests that the deal-making engine that helped modernise Portuguese industry over the past decade is running on fumes.

Not all sectors are frozen — mining investment in Portugal is surging as tungsten prices hit record highs and the Borralha project advances.