Top Wall Street CEOs and dealmakers are anticipating an uptick in larger mergers and acquisitions under the incoming Trump administration, after such megadeals evaporated this year due to a harsher regulatory environment.
On Tuesday, Trump named Andrew Ferguson to replace Lina Khan as the chair of the Federal Trade Commission, appointing a current Republican member of the agency who has promised to ease up on the policing of large tie-ups.
"There hasn't been a single deal over $40 billion in 2024 and if you go back in history, there are usually a handful of them that are above $40 billion. The era of the large deal is certainly not dead - and we would expect to see some of those transactions come back in 2025," Tom Miles, global co-head of M&A at Morgan Stanley, said in a panel at the Reuters NEXT conference in New York.
Wall Street executives have so far cheered the prospect of business-friendly regulations and are anticipating a burst of deals next year, as Trump's return to the White House is likely to significantly ease some regulatory pressures that dealmakers faced under the Biden administration. On Tuesday, Goldman Sachs CEO David Solomon said dealmaking in equities and M&A could exceed 10-year averages next year.
"I am quite optimistic that this administration is going to run a very, very pro-growth agenda," Solomon said.
In an early sign of increased optimism, more than $40 billion worth of M&A transactions were announced in the U.S. on Monday, including the $13 billion tie-up between Madison Avenue advertising giants Omnicom (OMC.N) and InterPublic Group (IPG.N).
"There is an expectation that Trump is going to perhaps follow the Reagan era of the 1980s and he's going to go first on (reducing) taxes, which will be a boost to corporate earnings. The next step would be around tariffs, immigration policy, as well as deregulation. So all of that really does provide tailwinds to an economy that's already very strong," said Michal Katz, Mizuho's Americas head of investment and corporate banking.
While the near-term outlook for M&A activity has brightened significantly, investment bankers and deals lawyers flagged the impact of policy uncertainty, protectionism, and inflationary pressures under Trump as potential headwinds for the business of corporate dealmaking.
"When you look at the data, the number of second requests and deals challenged under Trump in his first term is about the same as it has been under Biden. But it's going to get better going forward because if you look at what the Biden FTC and the DOJ have done is they completely turned the antitrust process on its head from the way it used to work," said Jim Langston, an M&A partner at law firm Paul, Weiss, Rifkind, Wharton & Garrison.
PRIVATE EQUITY BOOST
Further cuts in U.S. interest rates are expected to benefit buyout firms, after a spike in financing costs during the last two years made financing leveraged buyouts more expensive and big deals hard to clinch.
The private equity industry is sitting on roughly $4 trillion of capital that is yet to be deployed and dealmakers anticipate a surge in buyout volumes next year.
"What we saw happening in the second part of the year is the return of private equity transactions. The third quarter had the highest volume of PE-backed transactions since the second quarter of 2022," said Katz.
Global M&A volumes stood at $3.2 trillion during the first 11 months of 2024, up from $2.76 trillion during the same period last year, according to data provider Dealogic.
Dealmaking activity is also expected to get a near-term boost from inbound acquisition interest from foreign buyers for high-growth U.S. companies.
"The inbound interest, the logic for it, the strategic interest of it, is a much bigger tailwind than the use of CFIUS against certain countries. As an overall deal matter, I don't see (the CFIUS issue) as something that's going to slow down the desire of capital to come into the US," said Miles.
