For dealmakers, regulatory chaos would undercut Trump’s pro-business tilt

With any other president, promises of less regulation and lower corporate taxes would have Wall Street’s deal machine salivating at the prospect of a feeding frenzy. Not so with a potential Donald Trump presidency.

That’s because executives expect a Trump administration would also bring with it policy uncertainty, trade wars, protectionism, and inflationary pressures, which will slow down mergers and acquisitions activity, interviews with bankers, lawyers and consultants show.

That’s leading some dealmakers to believe the environment for corporate M&A activity might not look much different under either presidential candidate: Trump or Democratic rival Kamala Harris.

Instead, dealmakers are waiting for the uncertainty around the outcome of the election itself to resolve, predicting mergers and acquisitions will pick up by early next year. In recent days, polls have projected that Harris and Trump remain neck-and-neck in the race for the presidency.

“With regard to election cycles, uncertainty is oftentimes the main factor. Once we have a decisive president-elect, that uncertainty will be removed and the markets can predict with a little bit more clarity as to what the policy dynamics might be going forward,” said Scott Joachim, co-chair of the private equity practice at Paul Hastings.

Representatives for Harris and Trump did not respond to requests for comment.

Much is at stake on the outcome of the elections for Wall Street’s dealmaking business, worth billions of dollars in revenue. While global M&A volumes have risen 14% to $2.85 trillion so far this year, deal activity has plunged from the record highs of 2021, when company boards and buyout firms capitalized on near-zero interest rates to pursue several mega transactions.

Several notable transactions, such as Nippon Steel’s proposed $14.9 billion takeover of US Steel, have also run into regulatory hurdles and rising protectionism, with stiffer national security reviews.

Even so, data shows deals activity is slightly higher than the levels seen during the first Trump administration. During the period between January 2017 and December 2020, deals worth an average of $1.63 trillion were signed annually in the US, with bankers at the time blaming a tough and unpredictable regulatory environment for holding back deals.

During the first three years of the Biden administration, deals worth an average of $1.9 trillion were signed annually, although those figures were boosted mainly by 2021’s record-breaking haul, according to data from Dealogic.

Some investment bankers pointed out that the Trump administration, too, tried to thwart some notable deals at the time. In 2017, for example, the US Justice Department attempted to block AT&T’s acquisition of Time Warner. In 2018, Trump successfully intervened to thwart Broadcom’s proposed takeover of Qualcomm on national security grounds.

One of the sources, who advises chief executives and board members, said based on his conversations, CEOs who have traditionally leaned Republican have become more cautious.

The source, who requested anonymity to speak about confidential conversations, said these people had been conditioned for decades to believe that low taxes and less regulation benefit their businesses but were now recognizing that predictability holds significant value as well, even though it is difficult to quantify.—Reuters