Wall Street has welcomed the possibility of a resurgence in mergers and acquisitions with the new Trump administration in place, and bankers and investors alike are already looking into what deals might happen first. I’m trying. The combination of rate hikes by the Fed and the aggressive antitrust approach exemplified by Federal Trade Commission Chair Lina Khan has significantly slowed deal-making over the past few years. Now that the election is over and FTC change is very likely, Wall Street is preparing for a new era. “The end of the election first and foremost removes uncertainty from the market. Markets like certainty and that is widely seen across capital markets.…In the medium to long term, IPOs, M&A should be a further catalyst for major companies,” Carlyle CEO Harvey Schwartz said on a Nov. 7 earnings call. Mr. Trump’s victory came at a time when the merger business was already showing signs of awakening. After a historically quiet 2023, deal announcements will increase 25% in 2024 compared to the previous year, according to Morgan Stanley. Recent interest rate cuts by the Federal Reserve may be helping to stimulate the trading market, especially for deals involving debt. “As interest rates decline, we clearly see more alignment between buyers and sellers, and valuation disparities are decreasing.As leverage continues to increase, the cost of capital is decreasing,” Law Firm said Stephanie McCann, partner at. McDermott Will & Emery, which works on private equity and small public transactions, told CNBC. The size and scope of deals could start to grow in the coming months, with the Fed expected to cut interest rates again in November and switch to a more business-friendly regulatory environment in January. Potential Candidates One of the common motivations for companies to acquire other companies is growth. Larger, more established companies want to show investors that they are not running out of ideas, and may therefore seek to absorb smaller, faster-growing companies. In that vein, Wolfe Research has identified small and mid-cap companies with high growth potential. One of them, elf Beauty, made a major acquisition of its own, signing a $355 million deal to acquire Naturium last year. Other stocks on the list may be more likely to seek a sale after some news this week. Hims & Hers fell more than 24% on Thursday after Amazon announced it would start offering similar health products to Prime members. Goldman’s list of companies considered strong candidates for some M&A activity over the next 12 months also included major companies such as Electronic Arts and Zoom Video Communications. EA has been frequently speculated as an acquisition target by major technology and media companies since Microsoft’s acquisition of Activision Blizzard, which was completed in 2023. Bank consolidation may also be an area to watch. Raymond James Washington policy analyst Ed Mills said banking activity has been slower over the past few years than during the 2008 financial crisis, making the group ripe for recovery. “In my opinion, bank M&A has resumed in all but the globally systemically important banks,” Mills told CNBC. In terms of the financial sector, Capital One and Discover Financial Services both saw their stock prices soar immediately after the election. The merger plan between these two companies appeared to be potentially unstable if the Democratic Party remained in power. Discover Financial’s DFS 1 Million Mountain stock soared after President Donald Trump’s election. Other candidates to keep an eye on include Tapestry and Capri, deals that have collapsed due to regulatory pressure in recent years. A merger between these two companies was blocked by a judge and dropped last week, but both companies could be players going forward. Spirit Airlines could also be back on the table after deals with Frontier and JetBlue fell through. The struggling airline announced last week that it was in “constructive negotiations” with its creditors. Potential issues President Trump’s second term is expected to be more pro-business than President Joe Biden, but the new administration’s approach to antitrust issues remains to be seen. Regulators conducted public investigations into big tech companies during the first Trump administration, and Trump’s attorney general nominee Matt Gaetz appears headed for a contentious confirmation process. “I think there’s some degree of wishful thinking that there’s going to be a laissez-faire approach to antitrust regulation, but I think that’s misplaced. There’s still a populist vibe in the Trump campaign, and in my opinion “Enforcement is tough and it’s not going to go away,” said Kyle Healy, a partner specializing in M&A at law firm Alston & Bird. Another issue may be cost. The S&P 500 index was already trading near all-time highs before the election, and the small-cap benchmark Russell 2000 index was up 4.9% in November. That can make finding the right price for an acquisition target a little more difficult. “The prices are pretty high,” Michael Linton, chairman of Warner Music and Snap, said on CNBC’s “Squawk on the Street” on Nov. 6, just as post-election rallies began. That will be a big consideration.”
