Not everyone will win in Trump's M&A revival
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Since Donald Trump won the U.S. presidential election, there's been a lot of talk on Wall Street about the return of animal spirits. People are excited for a deals and M&A comeback. Basically, it is game on for mergers and acquisitions again. Wall Street excited, I think, for less regulation under Trump. Right.

Right now, everyone wants a piece of the action. Make no mistake. You know, we certainly think that 2025 will be the year of deals. Loads of deal-making also fits in nicely with the Donald Trump brand that he's crafted for himself over the years. Donald Trump has very studiously portrayed himself as a deal-maker. So anyone who wants to do deals...

is going to see a president who kind of speaks their language, who is in favor of companies doing mergers and acquisitions, and is going to remove some of the red tape that has been clogging up the system, really, for the last few years. So in theory, Trump is going to be basically catnip for M&A. But as Inauguration Day gets closer and closer, that theory is looking like it could be, in practice, more complicated than it originally appeared.

It's pretty widely expected that President Trump is going to be really good for dealmakers and companies that want to merge with each other. But a recent deal made us realize that actually maybe life under Trump might be no easier for a lot of these people than life under Biden. I'm Michaela Tendera from the Financial Times. Today on Behind the Money...

why expectations of an M&A bonanza might not hold up in the next Trump administration. I'm John Foley. I'm the head of the Lex column here at the FT. The Lex column is kind of the opinion section on companies and markets and deals with the back page of the newspaper for anyone who still reads physical newspapers. Well, John, welcome to the show. Thank you for having me.

So let's establish something here. In order to have a conversation about dealmaking, we also have to talk about antitrust regulation. That's because in the U.S., like many places, the government has the ability to intervene in a potential deal if it wants. Now, in the U.S., for a long time, that decision to intervene has mostly revolved around a general idea. If one company buys another one, prices need to stay down.

So, John, tell me a bit more about that. Yeah, it was generally understood that what antitrust regulation was supposed to do was protect consumer welfare. And that's pretty simply looking at whether consumers are going to be better or worse off and boiling it down even further. And I'm being a bit simplistic here, but it's is the price of the stuff on the shelf in the showroom, whatever it is, going to go up as a result of this merger? And if so, it's probably bad. So that was the very simple way of looking at it.

So the historical argument is that we need antitrust laws so that companies don't form monopolies and drive up prices. But the Biden administration had a fairly distinct approach that was in a bit of a league of its own, right? Yeah, Joe Biden's presidency started and the administration quite quickly came in with what I think it's fair to say is a very merger skeptical approach.

And the people that he put in the most important positions within the regulatory framework, and those would be Lina Khan, who's at the Federal Trade Commission, and Jonathan Cantor, who deals with antitrust merger control at the Department of Justice. They both continued that agenda of taking a view that generally very big is quite bad.

And they really showed that in what they've said and what they've done since then. Yeah. So tell me more about what they've been doing the past few years. In what ways have things been just so radically different? So, yeah, the Biden administration is trying to do some stuff that is in some ways similar to things we've seen in Europe already. It's kind of

a more academic approach to mergers, looking at things that the previous system might have missed. And often a phrase that you hear is novel theories of harm. So when we talked about how the old way was looking at whether consumers were better or worse off, this new way, which is a bit more abstract in a sense, sometimes people call this hipster antitrust.

Wait, I'm sorry. Hipster antitrust? You mean like craft beer and tattoos and beards? Right. So it's a dismissive way of talking about some of these like modern theories that I believe started maybe on Twitter during the first Trump administration. This debate began and kind of rose to prominence when a senator from Utah, Orrin Hatch, gave a speech where he talked about how as much as he loves politics,

avocado toast from time to time. He wanted everyone to know that antitrust is really about meat and potatoes being in this case, of course, just keeping prices low. So what would be an example where the Biden administration was putting these more academic theories to work?

So one example would be the attempted merger in 2022 of Simon & Schuster, which is a publishing firm with Penguin Random House. Now, these are both really big publishers. So you can imagine putting two very big publishers together. That's not a super controversial thing when it comes to looking for anti-competitive aspects.

But one thing that was kind of interesting was that the DOJ focus, the Justice Department focus, not just on prices. It wasn't about the next installment of the Harry Potter books being more expensive on the bookshelf. It was about authors not having enough competition in the market for publishers. So if you're an author, you can't play the publishers off against each other.

as easily. So in a way that was like saying... To get a better deal on the book that you're writing. Exactly. So in other words, rather than just worrying about the consumers, this was a deal that was also about worrying about the producers.

And that is, in a sense, a novel way of looking at competition, which in the recent past have been all focused on what price are you going to pay at the checkout? Right. And I think back in 2022, the DOJ ended up blocking that merger and it never happened. Yeah. So these sorts of efforts, it's probably discouraged companies from trying to do deals at all. I mean, all of that talk about big is bad has sent a real chilling effect through the market. Yeah.

Okay, so the Biden administration has had these different philosophies that not only stop some mergers from happening altogether, they also put a chill on the market for the last few years where companies that were thinking about merging just said, no thanks. But now Trump is coming in, a self-styled dealmaker. So this is going to be a massive change then, right? Yeah.

Well, Trump and the Republicans are definitely seen as being more friendly to companies, more amenable to companies doing what they think is best to make a profit. And they don't like red tape. Trump hates red tape. So, yeah, in theory, we should get a revival in dealmaking. The problem is that there are areas where this is a bit murky. There are lots of nuances that we need to consider because actually the revival in deals may not happen evenly. It may not happen at all, but...

We still don't really know exactly what antitrust policy under Trump is going to look like. But certainly judging by one recent deal, what might still be bad is certain kinds of foreign takeover of U.S. assets. Breaking news this morning. This just happened a few moments ago. President Biden officially blocking the Ponce deals proposed $15 billion deal to require U.S. steel. President Joe Biden blocked a multibillion dollar takeover of U.S. steel by a Japanese company.

Nippon Steel, Japanese steelmaker, made what looks like a really generous offer for US Steel, its rival. And ultimately, that deal got killed by Joe Biden. It wasn't killed because of antitrust. It wasn't killed because it would have created excessive competition in the sector. It was killed for another reason, just because he felt that it was a risk to national security. It's an example of a deal that on whoever's president might have failed. Trump also didn't like this deal, albeit for slightly different reasons.

But he has said this deal doesn't really need to happen and I would also have blocked it. So if Trump takes the view that certain kinds of foreign takeover activity are a risk to national security, those deals may not happen. So what do you think that tells us about Trump's future policy? I mean, the fact that Trump has said that he also was not in favor of this deal. We're going to have to find out. People want predictability. And on this score, they don't really have it.

Nippon Steel is a Japanese company, and often concern about foreign takeovers comes from a small set of countries that we deem to be threats. So China is a classic example. Japan has tended to be a really good friend of the United States, but it's led people to say, well, what is a friend of America? Are there any countries that are going to be presumptively a threat to national security? Are there any countries that are going to be presumptively fine? And we just don't know anymore, so we'll have to wait and see.

OK, so foreign buyers are probably in for a challenging time under Trump. Are there any other areas that could hit roadblocks? I mean, the big one is tech. Everything is tech right now. Everyone is obsessed with tech. And Trump is obsessed with tech. Biden was obsessed with tech.

Artificial intelligence, all that. Artificial intelligence, social media, online video. Dominating the stock market. Exactly. It dominates the stock market. It dominates our brain space. And potentially it dominates the mergers and acquisitions market too because the biggest tech companies, companies like NVIDIA, Meta Platforms, Apple, Alphabet, which owns Google, they have...

tens if not hundreds of billions of dollars to potentially spend on deals. And they are really keen to spend it in an aggressive way, identifying potential competitors and businesses that they could make big. So why is this a more complicated area than if these tech companies are excited to unleash this?

Well, so the first thing is just looking at who Trump has put in some of the top positions in the regulatory framework. So the guy who he's named for the FTC, so that he would replace Lena Kahn, is Andrew Ferguson, who is already at the FTC as a commissioner and who has been quite hawkish on tech in some ways. Not quite in the same ways that Kahn was, but he's certainly talked about tech's chilling effect on freedom of speech, which is a common theme that we hear from the Republican Party.

At the DOJ, Gail Slater is going to replace the current antitrust chief, Jonathan Cantor. She's worked in tech. She's worked for tech lobby firms. She's also been close to the Trump campaign. She was also an advisor to J.D. Vance, the vice president, who is very hawkish on tech and wants to break Google up. So when you look at their...

prior and the things they've said, what you get is a sense that they are first and foremost Republicans. So they're going to probably share that aversion to excessive red tape or to government meddling where they feel it doesn't belong, but they are not going to be a pushover. Their approach may focus more on this kind of Republican talking point of freedom of speech and expression rather than the Democrat talking point, which was much more about other kinds of harm to society and traditional anti-competitive concerns.

Well, so what do you mean by that? How would freedom of speech play a role in an acquisition?

So if you think of the main objections to big tech companies doing deals under the Biden administration, it was that they were effectively too large already, more often than not. Whereas the Republican objection to companies like Meta Platforms, which owns Facebook, or Alphabet, which is the owner of Google, is that they have posed a threat to free expression. Now, what does that actually mean? Well, Andrew Ferguson, who's coming in to replace Lena Kahn at the FTC, he's talked about how a lot of these platforms have suppressed debate over

on issues like where COVID-19 came from and whether the vaccines for COVID were really safe and whether the 2020 election was stolen. So Republicans would like to see companies like Facebook take their foot off the pedal when it comes to censoring is the word that's often used, but moderating is a word that the companies themselves would use instead. So how might we see this play out over the next four years? Can you think of an example?

A really interesting test case of this could be TikTok. TikTok, super popular short form video app, about 170 million American users. Congress has decreed that its Chinese owner, ByteDance, has to either sell it or shut it down. Now, this is being deliberated as we record this podcast by the Supreme Court. But let's say that another company tries to buy TikTok. Let's say Meta is the logical buyer because Meta already runs products like Instagram, Reels, which are very similar to TikTok.

Now, if that deal came up under the Biden administration, it's almost certain that the regulators would do their very best to shut it down because Meta is already so big. But...

Look at it from the other side, and that deal maybe doesn't look so bad after all. Meta does have a large share of online advertising, but it's a much lower share than Google. TikTok's share of online ads, which is probably the main market here, is quite small. So the question then would be, is this a threat to free expression? It's very likely that the regulators would, or will if this deal comes through, be asking,

Is Meta plus TikTok bad for our free speech? Now, it so happens that Meta in the last week or so has announced all kind of very sweeping changes to its content moderation policies to let through more political content and basically answer some of these questions slash concerns that the incoming Republicans have. So that deal may be more palatable under the new administration than it would under the last, but it would certainly face a very different set of challenges.

OK, but wait a minute here. Just to make sure that I'm following this. Isn't this idea of regulating deals based around issues of free speech just the Biden administration's academic approach repackaged? You know, considering some sort of other factor that has nothing to do with driving prices up? You're right. Like, it doesn't make sense to think that free speech would be an issue. But it just is because that's what Republicans like to talk about.

If you think about that old idea that antitrust should stick to its knitting and it should be about price goes up, price goes down, price stays the same, freedom of speech shouldn't really have anything to do with that. In a sense, that's sort of like that is hipster antitrust, although it's a kind of right-wing version of hipster antitrust, this idea that

you are taking an interest in whether social media companies are suppressing conservative speech. But that is just the reality, right? So if you want a deal to go through without substantial political opposition, you need to be a company that politicians don't like to get angry about. So, John, for the people who are banking on the revival of these quote-unquote animal spirits on Wall Street, I mean, should they just pack it up and go home? We've talked about all these complications.

Look, I think it's fair to say it's not going to be a free-for-all. But I do think that if you look at the data, it's very likely that we will see an uptick in M&A. Now, through the arc of history, over time, it tends to follow a surprisingly stable trend, actually. I was looking at a chart put together by Morgan Stanley that showed

M&A as a share of US GDP, the total amount of deal making as a share of US GDP. And it normally averages around 20%. Now we're currently below 15%. So if you think it's going to just revert to the average and even go no higher, that's around $1.5 trillion of deals on top of what we already saw this year to be done. So just

Maths basically tells you that we're below trend. So we should be seeing more activity sooner or later, especially once that chilling effect that we talked about with the Biden administration is removed. So where are you expecting to see deals this year? Which sectors are you thinking about most?

Airlines are always going to be looking to do deals because times are always tough in the airline industry. They're always looking to save costs. I think that the biggest source of smaller M&A is the banking sector. America has 4,000 banks. That's a lot of banks.

Some of them are really not big enough to survive in a normal world. And they're facing a lot of competition from like JP Morgan. Absolutely. Absolutely. And so we will see more mergers in the banking sector. And certainly the bank, the M&A advisors and banks that I talk to do expect a lot more activity in that sector, in the financial sector.

Now, what about private equity? I feel like I've been hearing a lot more about that space and doing deals there. Yeah, private equity is the other area that we're likely to see fire up again because private equity firms, companies like Blackstone, KKR, Apollo have a load of money that they're waiting to spend.

And lots of companies that they've already bought that they would like to get rid of to get the cash back and give back to their investors. And that hasn't really been happening. Activity has been picking up a bit, but there's a lot more to go. That's typically a third of all merger activity. And one thing that they can breathe a sigh of relief over is that the Biden administration had talked about taking a tougher view on private equity, particularly. And it's very unlikely that the Trump administration

administration is going to continue that initiative so they will be able to relax a bit and start doing some creative mergers.

Big picture question here. The rate of dealmaking has been a big topic of discussion under the Biden administration, having had this chilling effect on deals. Now deals could be increasing under Trump with some caveats. But is the U.S. economy necessarily better off if –

more deals are happening. What does this really mean for you and me? I love that question because it's one that people have argued over for decades about whether mergers are good or not. There are lots of studies suggesting that the answer is probably not often because they don't do the things they're supposed to do. They often fail to achieve their targets. One thing that is clear is that mergers, like people dance around the subject, but a lot of the reason for two companies merging is so they can lay

staff off. They talk about synergies, cost savings, reducing overlap. In practice, that means shedding jobs. Now, you can take two views of that. You can say, well, that's necessary, and then people will find new jobs. Or you can say, it's not great when people lose their jobs. And on the US Steel merger with Nippon Steel, one major opponent to that deal was the union, the US Steel's union, which didn't want to see jobs go. So,

Fewer deals means less turbulence, certainly, in the job market, whether you think that's a good thing or a bad thing. CEOs, of course, love doing deals because one CEO will end up running a bigger company and the other one will probably get a payout as they retire. So they're always going to want more M&A rather than less.

So you mentioned people losing their jobs. I mean, if that happens, won't that end up hurting Trump politically? That is such a good point, because the dirty little secret of M&A is that it often is a way of streamlining workforces, which means firing people, at least in the short run. And although Trump and Biden will disagree on a lot of things, they're both actually

out to do what they believe is best for America. And both of them will agree that maximum employment is best for America. Now, we're starting in a good place because unemployment, which jobs data came out recently and showed that unemployment is very low. It's 4.1%, which is really good. So we're in the early days of that. But certainly deals that look to be predicated on large job losses are going to face trouble whether the White House is red or blue.

Now, since President-elect Trump is all about promoting his brand, I'm curious, if you had to give his M&A philosophy a name, what would you call it? I guess from their perspective, they'd probably call it something like back to basics. It's all about getting rid of some of this like hipster fluff around, you know, novel theories of harm. If you ask corporate America, they probably would like to see something that they might call America first, regulation second.

Thanks for being on the show, John. Thanks for having me. Behind the Money is hosted by me, Michaela Tendera. The show is produced by me, Safiya Ahmed, and Katya Kamkova. Sound design and mixing by Joseph Salcedo and Sam Giovinko. Original music is by Hannes Brown. Topher Forges is our executive producer. Cheryl Brumley is the global head of audio. Thanks for listening. See you next week.

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