Wall Street is betting corporate dealmaking could bounce back next year if the new Trump administration ushers in lower interest rates and looser regulatory scrutiny.
The number of deals and their value are both below pre-pandemic levels. In the U.S. deal values fell 23% in 2023 from just before the pandemic, while the number of deals slumped 20%. The current year is on track for and even deeper slump, according to Dealogic.
That could change thanks to the Federal Reserve loosening its interest rate policy and returning President Donald Trump vowing to slash regulations. Trump's planned cuts to the Federal Trade Commission could also mean less staff scrutinizing antitrust concerns.
“President Trump’s administration is set to continue its push for deregulation across various sectors and existing governmental agencies, aiming to lighten the regulatory load on both the economy and businesses,” said EY chief economist Gregory Daco.
The Fed has cut interest rates twice since September and Wall Street expects another rate cut next month.
The central bank had held rates at historic highs through much of 2023 and 2024. That made mergers and acquisitions more expensive and less attractive.
At the same time, U.S. regulators were closely scrutinizing more proposed deals over antitrust issues, resulting in the delay or scrapping of potentially big deals over the years.
Kroger’s proposed $24.6 billion purchase of rival Albertsons has been stalled since late in 2022. The Federal Trade Commission alleges the deal would eliminate competition and lead to higher food prices.
Amazon walked away from its planned buyout of robot vacuum maker iRobot following scrutiny from U.S. and European regulators. WillScot Holdings, which makes portable classrooms and mobile offices, also scrapped a proposed deal under pressure from regulators.
The White House released updated merger guidelines in late 2023 meant to solidify the Biden administration’s tighter regulatory regime. Officials said consolidation had long run unchecked, diminishing competition and hurting consumers.
U.S. regulators' efforts to break up Google had also raised caution in the industry over entering into deals.
