Prominent Wall Street executives and financiers are expecting an increase in large mergers and acquisitions with the advent of the incoming Trump administration, following a year where such megadeals dwindled due to stricter regulatory conditions.
On Tuesday, Trump appointed Andrew Ferguson as the new chair of the Federal Trade Commission, bringing in a current Republican member of the commission who has pledged to relax oversight of significant mergers.
“In 2024, there hasn’t been a single transaction exceeding $40 billion, and historically, there are typically several that surpass that threshold. The large deal environment is certainly not finished – we expect to see some of those deals return in 2025,” commented Tom Miles, global head of M&A at Morgan Stanley, during a panel at the Reuters NEXT conference in New York.
Wall Street leaders have expressed optimism about the potential for business-friendly regulations and foresee a wave of deals in the coming year, as Donald Trump’s potential return to the White House is likely to significantly alleviate some regulatory challenges that dealmakers encountered under the Biden administration. On Tuesday, Goldman Sachs CEO David Solomon mentioned that equity and M&A activities could surpass the 10-year average next year.
In an early indication of rising optimism, more than $40 billion worth of M&A deals were declared in the U.S. on Monday, which included the $13 billion merger between Madison Avenue advertising titans Omnicom and InterPublic Group.
“There is anticipation that Trump may revert to the pro-business policies of the Reagan era in the 1980s and potentially initiate (tax) reductions, which would positively impact corporate profits. The next focus would likely be on tariffs, immigration policies, and deregulation, collectively providing a favorable boost to an already robust economy,” stated Michal Katz, Mizuho’s Americas head of investment and corporate banking.
Although the short-term forecast for M&A activity has improved considerably, investment bankers and transactional lawyers highlighted policy uncertainty, protectionism, and inflationary pressures during Trump’s administration as potential obstacles for corporate deal-making.
Further reductions in U.S. interest rates are anticipated to aid buyout firms, following a rise in financing costs over the past two years that made leveraged buyouts more costly and significant deals difficult to secure.
The private equity sector is currently holding approximately $4 trillion in unallocated capital, and dealmakers expect a rise in buyout activity next year.
“What we observed in the latter half of the year was the resurgence of private equity deals. The third quarter saw the highest number of PE-backed transactions since the second quarter of 2022,” noted Katz.
Global M&A activity reached $3.2 trillion in the first 11 months of 2024, an increase from $2.76 trillion during the corresponding timeframe last year, according to Dealogic data.
Deal-making is also projected to receive a short-term uplift from international buyer interest in acquiring high-growth U.S. firms.
“The inbound interest, along with its underlying rationale and strategic appeal, is a considerably stronger advantage than the application of CFIUS against certain nations. Overall, I don’t see the CFIUS issue as a factor that will dampen capital’s eagerness to invest in the U.S.,” asserted Miles.
Barclays pointed out that Alphabet, which earns over $100 billion annually, can absorb the expenses tied to Waymo’s development. In contrast, GM is projected to realize earnings of $14 billion to $15 billion for 2024.
“Waymo illustrates that an AV robotaxi enterprise is best owned by an organization with substantial financial resources,” said Barclays.
“We view this news as a positive development for GM, given that investors appeared to be losing faith in its intense expenditure (~$10B) related to robotaxi development with minimal results,” wrote Garrett Nelson, an analyst at CFRA Research.
GM shares rose 3% in after-hours trading on Tuesday right after the announcement, but those gains were relinquished during Wednesday’s regular session, dropping about 1% in late afternoon trading.
Nelson indicated that the announcement represented “a blemish on the credibility of GM management, which, as recently as last year, assured investors that the Cruise division could generate $50 billion in annual revenue by 2030.”
Year to date, GM has significantly outperformed its rivals. Its stock is up 45% for 2024, while Ford’s has decreased by 14% and Stellantis’ has fallen by 37%.
GM CEO Mary Barra was already scheduled to talk with reporters on Wednesday evening. She is expected to face inquiries regarding the cost-reduction strategies the automaker is implementing as it navigates fluctuations in EV demand, technological changes, and a new presidential administration.
“This is the most recent in a series of decisions that GM has revealed, emphasizing our commitment to utilizing the right technology for our company and the industry’s future, and demonstrating our dedication to executing swiftly and efficiently,” Barra told analysts on Tuesday.
