Biden election set to boost investor confidence
Partner Co-Head Antitrust
16 December 2020
The election of Joe Biden is likely to usher in an era of more stable and predictable politics in the U.S., increasing the kind of investor confidence on which M&A transactions thrive.
As such, we expect the strong growth in activity that we have witnessed over recent months to continue once the transition to a new administration is finally complete.
New policy directions
In terms of likely policy outcomes, much will depend on the make-up of Congress. Control of the Senate will not be decided until January.
Traditionally the U.S. market prefers to see government divided between the administration and Congress (in this case, a Democratic administration and a Republican Senate) but will probably adapt easily whatever the outcome turns out to be, given that this looks set to be finely balanced in any event. However, we can expect a change of direction in key policy areas, including:
- greater antitrust enforcement, particularly for consumer-facing industries
- action forcing the big internet companies to change their business models, although falling far short of break up
- possible tougher regulation on the big banks
- extension of the Affordable Care Act (Obamacare) could increase pricing pressure on the healthcare sector
Some of these measures could put a damper on M&A activity, but largely the effect should be relatively mild. The drivers of M& A activity will remain largely unchanged. Drivers include:
- the search for ways to accelerate growth
- pressure to consolidate within sectors to improve efficiency and costs
- the need to deploy pent up reserves of liquidity
- continuing access to affordable debt finance for the right deal
Covid-19 is the biggest unknown
But the biggest threat to activity remains Covid-19. Any positives or negatives arising from the election will be overshadowed by whether the pandemic is brought under control and if the economy is forced to withstand lockdowns.