Wall Street expects Trump’s presidency to boost deal-making

Dealmakers and business leaders on Wall Street expect the floodgates to open for merger and acquisition activity after President-elect Donald Trump takes office in January.

And he’ll likely get help from Congress. Trump defeated Democratic nominee Vice President Kamala Harris, and Republicans claimed a Senate majority in this week’s election. This red wave is expected to lead to a relaxation of deal-making rules, with a lot of pent-up demand.

“We kind of know where the world is going in a Trump environment because we’ve seen it before,” Jeffrey Solomon, president of TD Cowen, said Wednesday on CNBC’s “Money Movers.” “I think the regulatory environment will be much more conducive to economic growth. There will be lighter and more targeted regulation.”

Solomon added that the scaled-back regulations will focus on certain areas “of particular interest to the Trump administration,” rather than a broad reassessment of the entire landscape.

In recent years, there has been increased scrutiny of pending deals by the Biden administration’s Justice Department and Federal Trade Commission, led by Chairwoman Lina Khan. Some have pointed to this dynamic as a chilling factor for deal flow. High interest rates and rising company valuations have also contributed.

Khan said in September that “if you see more scrutiny of mergers, you can see greater deterrence of illegal mergers.” Her hard line has received harsh criticism, but now there is optimism about an upcoming FTC with a lighter hand.

“Assuming interest rates fall and corporate tax rates fall, the ingredients are in place for a truly active M&A market,” said one top dealmaker, who spoke to CNBC on the condition of anonymity to speak candidly.

Markets recovered on Wednesday after the Republican president’s victory Dow Jones Industrial Average increased by 1,500 points to a new record.

Some sectors, including especially the financial and pharmaceutical industries, are likely to get a boost under a second Trump administration, experts say.

Pharmaceutical industry executives are especially optimistic that lighter antitrust enforcement could pave the way for dealmaking, said a healthcare-focused mergers and acquisitions consultant, who added that antitrust enforcement under neither governments could have “hardly gotten worse” but now believes things will improve. meaningful.”

Khan has taken on dozens of biopharmaceutical mergers in the past four years, arguing that monopolies will stifle the development of new drugs in certain disease areas and harm consumer choice. Biotech company Illumina said last year it would divest diagnostic test maker Grail after heated battles with the FTC and European antitrust regulators.

Also last year, the FTC blocked Sanofi’s proposed purchase of a drug in development for Pompe disease, a genetic disorder, from Maze Therapeutics. Sanofi ultimately terminated that deal.

“Whether or not Lina Khan is rejected on day one is an important consideration, but even if fewer changes occur at the FTC, there is no doubt that this administration – at least on paper – will be much friendlier when it comes to business combinations. Jared Holz, Mizuho’s healthcare strategist, said in an email Wednesday.

One top dealmaker generally expected an uptick in mergers and acquisitions, but agreed that the pharmaceutical and financial sectors in particular were primed for a revival. That dealmaker also noted that with the Senate folding, more outspoken antitrust voices like Sen. Elizabeth Warren, D-Mass., could find it harder to push for DOJ or FTC investigations.

In the financial sector, regional banks are recognizing the need for scale, making them likely candidates for consolidation, a former industry executive said, noting that smaller banks have been gobbled up for “some time.” That person expects the pace and scale of those acquisitions to increase under Trump’s presidency.

Other sectors, such as technology, may still face an uphill battle to get deals done.

An M&A advisor, who also spoke anonymously to CNBC, noted that Trump’s disdain for Big Tech companies — historically active dealmakers — could keep them on the sidelines. On Wednesday, technology leaders took to social media to congratulate Trump.

Apparent Republican Party opposition to the CHIPS law means semiconductor consolidation could be challenging, the adviser noted, while cautioning that it is still too early to know what a Trump presidency would mean. CNBC reported this earlier Qualcomm recently approached Intel about a possible takeover.

“I think the easiest way to put it is more deals, less regulation, with the government keeping its thumb on the scale, perhaps with a willingness to pick winners and losers,” said Jonathan Miller, CEO of Integrated Media, specialist in digital media. media investments.

A Trump presidency could usher in a number of retail deals that have been hamstrung by the FTC. Krogers bid to take over the supermarket chain Albertsons could have a better chance of being approved under Trump, just as they might Tapestry proposed acquisition of Capri.

The Kroger-Albertsons merger is currently under review by a federal judge, while Tapestry is in the process of appealing a federal order granting the FTC’s motion for a preliminary injunction against the closing.

“The FTC’s hostile approach to mergers and acquisitions will almost certainly be reset and replaced with a worldview that is more favorable to business dealmaking,” said GlobalData Director Neil Saunders. “This doesn’t necessarily mean that big deals like Kroger-Albertsons will be approved, but it does mean that others like Tapestry-Capri will receive a much warmer reception than under the Biden administration.”

Meanwhile, continued turmoil in the media industry has led many to see consolidation as the next step for the sector.

Warner Bros. Discovery CEO David Zaslav on Thursday highlighted the opportunities that could arise if regulations were to relax, doubling down on comments he made earlier this year at Allen & Co.’s annual Sun Valley conference.

“We have an incoming new government. It’s too early to tell, but it could provide a pace of change and opportunities for consolidation that could be very different, and that would have a really positive and accelerated impact on this sector that is necessary,” Zaslav said. said during an earnings call.

Owner of a channel group Sinclair on Wednesday reflected a similar sentiment.

“We are very excited about the regulatory environment ahead,” CEO Chris Ripley said during an earnings call. “It feels like a cloud is lifting over the industry.”

Still, the track record between the previous Trump administration and the Biden administration on media industry deals has been mixed.

Trump’s DOJ allowed this Disney buy Fox assets, but then sued to block AT&Ts deal for Time Warner.

Under the Biden administration, Amazon’s $8.5 billion deal for MGM and the merger of Warner Bros. and Discovery Communications both passed, but a federal judge blocked the $2.2 billion sale of Simon & Schuster to Penguin Random House.

Skydance Media and Paramount Global agreed to merge earlier this year and expect to receive regulatory approval in 2025.