Intralinks, a firm created 20 years ago to enable “high-stakes transactions and business collaborations,” has surveyed global dealmakers on the upcoming U.S. presidential election and on how it may affect the economic and regulatory environment for mergers and acquisitions.
The gist of it is: in a database of 1,600 M&A professionals worldwide, 56% believe that a hypothetical Donald Trump presidency would have a negative impact on the M&A space.
On the other hand, the majority view is that a Hillary Clinton presidency would have no impact on M&A activity at all. A healthy 57% say so. Another 26% say that a Clinton presidency will have a positive impact.
A blog entry by Philip Whitchelo, Intralinks’ Vice President of Strategy and Product Marketing, says that the 26% number is “perhaps unsurprising.”
Merger policy only belatedly became an explicit issue in the campaign. Both campaigns have reacted (negatively in each case) to the planned merger of AT&T with Time Warner, which amounts to the integration of data pipes with data content providers. Still, there is plenty of room for speculation about which hypothetical administration will do what in this area.
Straws in the Wind
There are a lot of straws in the wind that may be useful in such speculation, and the straws seem to be blowing in different directions, so no specific conclusion about the impact of a Clinton victory in particular should be altogether surprising. One common way to look at it involves a presumption that the next Clinton presidency might be more-or-less like the last Clinton presidency in these matters. There was certainly no bias against mergers during the William Jefferson Clinton years, and in some markets there may have been a bias in favor of concentration, which was seen as rationalizing behavior.
In the year 2000, the last year of Bill Clinton’s presidency (a time when everyone on the Federal Trade Commission was a Clinton appointee), the FTC challenged only 1.7% of the prospective mergers of which it was informed. For purposes of comparison: in 1988, the last year of Ronald Reagan’s presidency, the FTC had challenged 1.4%. This was not a significant swing in the direction of merger blockage.
Indeed, the highest percentage of FTC challenges in recent history occurred in 1990, when the FTC brought actions against 2.7%. This of course was the middle of the administration of George H.W. Bush.
Look at absolute numbers rather than percentages: there were 9.566 mergers in the U.S. in 2000. There had been only 2,258 in 1988. That discrepancy represents changes that have nothing to do with the party or the individual in the White House but … that is after all the point. All this tends to support the 83% of the Intralinks sample who said either that a new Clinton presidency would not be a negative or that it would be a positive for the M&A space. Either view is, indeed, unsurprising.
The Intralinks survey also disclosed some rather predictable regional differences as to the most important causes of declines and falls in merger activity. In North America, respondents thought that the election would be the single highest-impact event in the next six months. But in Latin America, deal makers are focused on monetary policy. In the Asia-Pacific region, they are all looking toward China. And in EMEA, they focus on the issue of the implementation of Great Britain’s exit from the European Union.
Speaking of Brexit and EMEA
Forecasters, cited by Intralinks itself in earlier publications, have been predicting a substantial slowdown in economic growth in the United Kingdom lasting through 2017, including declines in business investment, home prices, and consumer spending. This might not be the best of times for merger activity there, although the extent of the consequences for the rest of EMEA is unclear.
In the second quarter of 2016, early stage deal activity in EMEA as a whole grew by 15.7%. Intralinks has said that it is “pleasantly surprised” by this, given all the challenges in the vast region.
Germany is the engine here. It showed positive growth in early stage M&A activity of 9% in the second quarter, and Intralinks has credited the “steady hand” of Chancellor Merkel.