Our US Public Policy Strategist expects a robust M&A cycle,
regardless of the outcome of the US election. But rising
antitrust concerns could create additional scrutiny on possible
future deals.
----- Transcript -----
Welcome to Thoughts on the Market. I’m Ariana Salvatore, from
Morgan Stanley’s US Public Policy Research Team. Along with my
colleagues bringing you a variety of perspectives, today I’ll
talk about the impact of the US election on M&A.
It’s Tuesday, August 13th, at 10am in New York.
2023 saw the lowest level of global mergers and acquisitions – or
M&A – in more than 30 years, relative to the overall size of
the economy. But we believe that the cycle is currently reversing
in a significant way and that politics won't halt the "Return of
M&A."
Why? Because M&A cycles are primarily driven by broader
factors. Those include macroeconomics, the business cycle, CEO
confidence and financing conditions. More specifically, unusually
depressed volumes, open new issue markets, incoming rate cuts and
the bottom-up industry trends are powerful tailwinds to an
M&A recovery and can offset the political headwinds.
So far this year we’ve seen an increase in deal activity.
Announced M&A volume was up 20 per cent year-over-year in the
first half of [20]24 versus [20]23, and we continue to expect
M&A volumes to rise in 2024 as part of this broader,
multi-year recovery.
That being said, one factor that can impact M&A is antitrust
regulation. Investors are reasonably concerned about the ways in
which the election outcome could impact antitrust enforcement –
and whether or not it would even be a tailwind or a headwind. If
you think about traditional Republican attitudes toward
deregulation, you might think that antitrust enforcement could be
weaker in a potential Trump win scenario; but when we look back
at the first Trump administration, we did see various
antitrust cases pursued across a number of sectors.
Further, we’ve seen this convergence between Republicans and
Democrats on antitrust enforcement, specifically the vice
presidential pick JD Vance has praised Lina Khan, the current FTC
chair, for some of her efforts on antitrust in the Biden
administration. In that vein, we do think there are certain
circumstances that could cause a deal to come under scrutiny
regardless of who wins the election.
First, on a sector basis, we think both parties share a similar
approach toward antitrust for tech companies. Voters across
the ideological spectrum seem to want their representatives to
focus on objectives like 'breaking up big tech' and targeting
companies that are perceived to have outsized control.
We also think geopolitics is really important here. National
security concerns are increasingly being invoked as a
consideration for M&A involving foreign actors, in particular
if the deal involves a geopolitical adversary like China. We’ve
seen lawmakers invoke these kind of concerns when justifying
increased scrutiny for proposed deals.
Finally, key constituencies' positions on proposed deals could
also matter. The way that a deal might impact key voter cohorts –
think labor unions, for example – could also play a role in
determining whether or not that deal comes under extra
scrutiny.
We will of course keep you updated on any changes to our M&A
outlook.
Thanks for listening. If you enjoy the show, please leave us a
review wherever you listen to podcasts and share Thoughts on the
Market with a friend or colleague today.
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