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,” said Tom Miles, global head of M&A at Morgan Stanley, 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 Donald 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.
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 and InterPublic Group.
“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.
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 in 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.
Barclays noted Alphabet, which has over $100 billion in earnings annually, can absorb costs associated with Waymo’s development. GM, however, is expected to record earnings of $14 billion to $15 billion for 2024.
“It’s clear from Waymo that an AV robotaxi business is best owned by an entity with deep pockets,” Barclays said.
“We consider the news a step in the right direction for GM, as we think investors were losing patience with its hefty spending (~$10B) related to robotaxi development with very little to show for its investment,” Garrett Nelson, analyst at CFRA Research wrote.
GM shares jumped 3% after-hours on Tuesday immediately after the announcement, but gave back those gains during Wednesday’s regular session and were down about 1% in late afternoon.
Nelson said the announcement was “a black eye for the credibility of GM management that, as recently as last year, told investors the Cruise business could generate $50 billion in annual revenue by 2030.”
For the year to date, GM has far outpaced its competitors. Its stock is up 45% for 2024, while Ford’s is down 14% and Stellantis is down 37%.
GM CEO Mary Barra was already scheduled to speak with reporters Wednesday evening. She will likely face questions on cost-cutting moves the automaker is taking as it navigates turbulence in EV demand, changing technology and a new presidential administration.
“This is the latest in the series of decisions that GM has announced which underscore our focus on having the right technology for the future of our company and the industry and reflects our commitment to execute with speed and efficiency,” Barra told analysts Tuesday.
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