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Deals for public targets take significant time to complete. During the interim, firm values can change substantially, inducing the parties to prefer deal renegotiation or termination. We predict the related costs will lead to increases in interim risk attenuating deal activity. We find increases in market volatility decrease subsequent deal activity, but only for public targets subject to an interim period. The effect is strongest when volatility is highest, for deals taking longer to close, and for larger targets. When possible, firms appear to shorten the interim window as risk increases. Firm-and industry-level measures of uncertainty reveal similar findings, suggesting the effect is not simply driven by an unobserved macro-level variable. We conclude interim uncertainty is an important factor in understanding the timing and intensity of merger waves.

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