What a Trump Presidency Means for the M&A Market
Now that we know the result of the 2024 election, we can start to look ahead to what the economy might look like next year and beyond. While a Kamala Harris presidency would have likely meant higher business taxes, most observers believe a Trump presidency will extend the provisions of the Tax Cuts and Jobs Act of 2017, which may jumpstart an M&A sector that has at times been somewhat stagnant. Here’s a brief look at what’s driving the current M&A environment.
Current Trends in M&A
The current M&A market is one of mixed signals. A recent report from Ernst & Young does a good job of capturing the state of affairs:
– Recent deal frequency is stagnant, while value is down. In October 2024, there were 108 deals, for a total value of $96 billion; by comparison, October 2023 saw 109 transactions for a total value of $260 billion.
– Overall year-to-date deal value has increased, reaching $1.32 trillion, a five percent increase from 2023.
While the October M&A market wasn’t necessarily booming, there have still been some pockets of M&A activity. Mergers of RIAs in the financial sector broke the record for monthly transactions in October, for instance, with 39 total deals, up from the prior record of 33 in January 2021
Lower Interest Rates May Help Middle-Market M&A
What to make of these trends? It’s important to recognize that we’re in a transitional phase, as one presidential administration ends and another begins. That may be one reason why recent overall deal volume hasn’t been on the rise; firms could be waiting to have a better sense of the economic outlook and direction of the country before completing a transaction. Every four years, it seems both buyers and sellers tend to pause and wait for the election outcome. This cycle has been no different, and we’re already seeing a rise in inquiries from both sides expressing interest in potential transactions.
When it comes to middle-market M&A, we expect a strong market going forward. One major source of that strength is an anticipated decline in interest rates. Lower borrowing costs for buyers mean we may see more deals with a straightforward cash structure, lowering negotiation timelines.
Changes to Government Regulation
The incoming Trump administration will likely prompt a burst of M&A activity for a couple of reasons. If tax cuts are extended, businesses may feel the economic environment is advantageous and pursue transactions accordingly. Additionally, the Trump transition team has made it clear they intend to pare back anti-trust regulations. Concerns over anti-trust regulation can often have a major chilling effect on deals; a shift in government policy might make firms more bullish on M&A.
One area that could constrainfuture M&A is tariff policy. Trump has spoken about imposing 60 percent tariffs on China and an across-the-board 20 percent tariff on all other goods imported to the United States. Some economists believe this could revive an inflationary spiral, which would likely put a damper on M&A activity.
Our View at Symmetrical
While the M&A market will always have its ebbs and flows, the combination of an incoming administration favoring lower business taxes and the decline in interest rates would suggest a favorable landscape for middle-market M&A. Our team at Symmetrical can help you consider the pros and cons of selling your business, and if you do decide to sell, we’ll be at your side through the entire process. Get in touch with us today to learn more about how we can help.