The upcoming US elections are expected to impact the M&A landscape, but according to Morgan Stanley, a strong M&A cycle is expected regardless of whether the winner is a Democrat or Republican.
“A Democratic win would likely support the current strong economy, a key driver of M&A, while a Republican win would likely favor a more supportive regulatory body,” Morgan Stanley said.
Despite the political uncertainty surrounding antitrust enforcement and geopolitical fallout, Morgan Stanley analysts are confident that these factors will not stop the “M&A resurgence.”
They assert that 2023 will see the lowest level of global M&A activity, adjusted for economy size, in more than 30 years. However, this trend is reversing dramatically, with activity actually increasing since the start of the year.
Analysts expect M&A volumes to continue to rise in 2024, driven by strong equity markets, open new issue markets, incoming interest rate cuts, and a positive industry outlook.
Historical data on presidential election cycles suggests mixed effects on M&A announcements, the bank says. Analysts reviewed the last seven election cycles and found mixed results, from a 45% decline during George W. Bush’s first term to an 88% increase in his second. The average change was a modest -2%, suggesting that M&A cycles are more influenced by macroeconomic indicators than by election outcomes.
Morgan Stanley added that a hypothetical Trump victory could ease antitrust enforcement somewhat, which could encourage higher levels of mergers and acquisitions of large-cap companies.
Even so, they add, there may be only minor differences between a second Trump term and a Biden administration when it comes to antitrust enforcement, and removing uncertainty about the election outcome could boost large-cap deals.
