Dealmaking was already on the ropes as businesses pared back their ambitions amid the pandemic, but uncertainty over tax and other policy items could impact valuations and disrupt transactions, says Randy Worzala, the regional director of business development for North America at TMF Group.
“M&A isn’t just going to fall off the face of the earth, but the elections could cause a longer pause on the M&A front,” Worzala says, adding that he expects dealmaking volumes to reach pre-pandemic levels after November.
Other legislative activity could pose a threat to M&A directly. If Democrats were to gain control of the Senate, lawmakers may be emboldened to pass laws like the Stop Wall Street Looting Act, industry watchers have warned. Introduced in July 2019 by Sen. Elizabeth Warren, D-Mass., the bill would restrict private equity activities.
Trade is another area where policy could shift depending on the outcome of the elections. Biden, who has spoken out about the Trump administration’s years-long trade dispute with China, could normalize relations with Beijing, says Steve Rosen, co-CEO of Cleveland-based private equity firm Resilience Capital Partners. Trump is not expected to seek rapprochement if he’s reelected.
“Biden could soften the trade war, which could be positive for investment theses, especially for companies with a manufacturing focus,” according to Rosen, who says the industrial businesses in Resilience’s portfolio have been negatively impacted by supply chain disruption caused by the U.S.-China trade war.
It remains to be seen how much of Biden’s campaign agenda is implemented if he is elected, although Rosen expects other factors, like interest rates or fiscal stimulus efforts, to have a more potent effect on business growth and investment decisions.
The coronavirus outbreak and the government’s response will continue to affect American businesses and M&A—regardless of who occupies the Oval Office, Rosen says.
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September 15, 2020 at 08:38PM
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How Will the 2020 Elections Impact M&A? - Middle Market Growth
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