What does President Trump mean for global M&A?
Donald Trump wrote in his book The Art of The Deal: “You can't con people, at least not for long. You can create excitement, you can do wonderful promotion and get all kinds of press, and you can throw in a little hyperbole. But if you don't deliver the goods, people will eventually catch on.”
In a string of bold policy announcements this week, the new US president reminded us what ‘delivering the goods’ means in his new job.
In the first two days in office, Trump rolled back Obama’s healthcare reforms, scrapped the newly signed Trans Pacific Partnership, and repeated his pledges to renegotiate both the NAFTA agreement and impose a 35% tariff on cars imported from outside the US.
That’s a lot of change in a short time. So, we have to ask the big question: what impact might the Trump administration have on global dealmaking?
Early indications are that overseas acquisitions of US companies will be subject to more intense regulatory scrutiny, making crossborder deals more risky. But this is likely to be initially focused on sensitive industries – such as energy, technology and defence – rather than a federal law barring any US company from being acquired by an overseas buyer.
Trump has said he wants to break up several mainstream media conglomerates, including the recently merged AT&T-Time Warner. But aside from media, corporate tax cuts should help boost acquisition war-chests for big players in a host of other industries. So expect more game-changing ‘mega deals’ ($10bn-plus) in 2017 and beyond, albeit taking longer to clear regulatory hurdles. Also, it’s worth remembering that dealing with protectionist governments is nothing new for today’s captains of industry.
Industry and political commentators – from Bloomberg to major law firms – have speculated that multinationals may be pressured to divest their Chinese operations if they want to do business with the US. This is more likely to affect multinationals headquartered outside the US than force US corporations to ditch their Chinese operations. If Trump adopts a hard line on this, the market could see more divestments, such as in mining and energy.
Acquisitive US buyers
As with previous election cycles, US M&A activity overseas was down around 20% in 2016 due to increased political uncertainty at home. This meant China overtook the USA for the first time as the world’s top acquiring country. But with the continuing business landscape of low interest rates, strong balance sheets, and activist shareholders calling for higher growth, we can expect the US to return to pole position as the world’s most acquisitive country in 2017.
While it’s still early days to take a firm view on how M&A-friendly the Trump administration will be, these announcements are more likely to affect major listed companies and multinationals, rather than our core clientele of SME owner-managers.
Trump’s mantra is about making America great again and stimulating growth. And we believe that that can only be a good thing for the global M&A marketplace.