Hey M&A Bankers, Trump Won
A year ago, a Donald Trump presidency didn't appear all that likely. So it felt almost as if Wall Street's dealmakers were speaking of an extreme -- perhaps even amusing -- hypothetical when they picked the "Art of the Deal" author last March as the best candidate for mergers and acquisitions.
Of more than 100 top M&A practitioners and observers surveyed by Brunswick Group at the time, 22 percent favored the "Apprentice" TV-show host. Democratic front-runner Hillary Clinton and the other Republican hopefuls all trailed behind him.
Well, as Trump will remind you again and again, he did win the election. And with the first quarter and his second month in the White House wrapping up, it's a good time to check in on whether he has in fact "woken up the animal spirits."
He has, according to Brunswick's 2017 survey, which was released this week as dealmakers and deal-chasing journalists gather in New Orleans for the annual Tulane University Law School M&A conference. Half the respondents see the Trump administration as a positive for merger activity because of the potential for corporate tax reform, less stringent antitrust oversight and repatriation of offshore cash. 1 What's more, 44 percent of them expect an increase in dealmaking this year, up from just 13 percent last year.
But hold on. Their optimism hasn't translated into big numbers quite yet; in fact, the opposite. With about $666 billion -- no joke -- of deals announced globally so far this year through Wednesday, we're on pace for the lowest quarterly tally since the first three months of 2014, right before the latest merger boom began.
A near-record amount of money was spent on deals such as acquisitions, spinoffs and joint ventures in 2015 (it would have been a record if it weren't for deals that collapsed due to regulatory interference or otherwise). Last year was nearly as strong, in large part thanks to AT&T Inc.'s $108.7 billion takeover of Time Warner Inc., a mega-deal that candidate Trump vowed to block yet looks headed for the finish line.
While Trump very well may loosen regulation that could open the floodgates, uncertainty is the biggest killer of takeover activity. CEOs -- at least in the U.S. -- still appear cautious, trying to figure out what exactly his presidency will mean for business and the economy longer term. It's no surprise then that deal volume in just about every industry is currently down in the U.S., with the notable exceptions being energy and banks. That said, survey participants pegged health care, consumer goods and tech as other areas that may be very busy this year.
There will be an elephant in the room down in Tulane, though. That's the Obamacare-repeal bill, which suffered an embarrassing defeat last week. Trump -- the man who campaigned on his business acumen and ability to get things done -- is learning that dealing with Congress is tougher than negotiating, say, construction of a new building. Will tax reform happen as quickly as hoped and with the anticipated benefits?
There's also the prickly jobs aspect of mega-dealmaking. It's a bit of a contradiction that Trump, who has focused on jobs in America, will be a boon for big acquisitions, which more often than not lead to mass layoffs. We haven't really seen a major U.S. merger this year underpinned by such synergies (there were plenty last year), but when we do that company risks being Trump's next tweet target.
As for the Trump takeover frenzy, still waiting ...
A group of administration officials including Gary Cohn, the former Goldman Sachs Group Inc. banker who heads the National Economic Council, will brief the president Thursday on options for comprehensive tax code changes.
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Tara Lachapelle in New York at firstname.lastname@example.org
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