The upcoming US elections are about to impact the M&A landscape, but according to Morgan Stanley, a robust M&A cycle is expected regardless of whether a Democrat or Republican wins.
“ADVERTISEMENT [Democrat] A win would likely support the current strong economy, a key driver for mergers and acquisitions,” while “an R [Republican] A win may benefit a more supportive regulator,” notes Morgan Stanley.
Despite the political uncertainty surrounding antitrust enforcement and geopolitical implications, Morgan Stanley analysts are confident that these factors will not stop the ‘return of M&A’.
They highlight that 2023 witnessed the lowest level of global mergers and acquisitions, adjusted for the size of the economy, in more than three decades. However, this trend is reversing significantly, with activity already increasing this year.
Analysts expect M&A volumes to continue to rise in 2024, driven by strong equity markets, open markets for new issuance, upcoming interest rate cuts and positive industry expectations.
Historical presidential election data shows the impact on mergers and acquisitions announcements has been mixed, the bank says. Analysts have examined the last seven election cycles and found mixed results, from a 45% decline during George W. Bush’s first term to an 88% increase during his second term. The average change was a modest -2%, suggesting that M&A cycles are more influenced by macroeconomic indicators than by election results.
Morgan Stanley adds that a hypothetical Trump victory could marginally ease antitrust enforcement, potentially leading to higher levels of corporate mergers and acquisitions.
While they add that there may be only minor differences between a second Trump term and a Biden administration in terms of antitrust enforcement, removing uncertainty about the election outcome could boost deals with major companies.
