Will Trump usher in the age of mega mergers?
Deserved or not, U.S. President Donald Trump has made himself synonymous with deal making. But as to whether or not Trump will usher in the age of mega mergers is about as calculable as what the 45th president of the United States will say next on Twitter.
Under Obama, antitrust enforcement picked up in the later years with the administration raising concerns surrounding several mega-deals including both the AT&T and T-Mobile merger plan in 2011 – which they walked away from after the department of justice said they’d challenge it – and Haliburton’s $34 billion merger with oil field services Baker Hughes, which was scrapped after facing scrutiny.
But there is a general buzz of optimism amongst analysts that the Trump administration will be more favourable for the corporate sphere. Not shocking, this is the guy who turned his business into a reality television show.
A good deal of that optimism stems from Trump’s appointments.
Let’s break it down: first up is Steven Mnuchin, who was confirmed as Treasury secretary in mid-February. Trump’s finance chairman during the campaign is a former Goldman Sachs partner with a net worth around $500 million. The large tax cuts and liberalization of finance regulations under Mnuchin should fuel some deal-making fervor.
Next on the list is former investment banker and Trump’s chief strategist Steve Bannon. Like Mnuchin, Bannon cut his teeth with Goldman Sachs, but Bannon specifically worked within the mergers and acquisitions in the heydays of the 1980s hostile takeover boon.
Then there’s fellow Goldman club member Gary Cohn, the former president and chief operating officer of the investment bank turned head of the National Economic Council, responsible for, as you guessed, economic policy.
The list continues of favourable deal makers: David Higbee, an M&A lawyer at Hunton & Williams, and Joshua Wright, economist and former Federal Trade Commission member under the George W. Bush administration. Both will advise Trump on his antitrust policy.
In fact, Wright penned an pro-merger op-ed for the New York Time back in November saying: “The new antimerger fervor is based upon the presumption that they are never a good deal for consumers because more consolidation always leads to higher prices, and never leads to cost savings or product improvements that benefit consumers. Both are demonstrably false. Antitrust agencies close the majority of their merger investigations precisely because the proposed deal offers no threat to competition or to the benefit of consumers.”
Of course, none of this is a guarantee because though there may be pro-merger whispers in his ear, Trump is and always will be: Trump.
Case in point: As of early February, Trump still clung to his earlier weariness surrounding AT&T’s pending $85 billion merger with Time Warner. The apprehension is a continuation of his earlier remarks during the campaign that his administration wouldn’t approve the merger.
“It’s too much concentration of power in the hands of too few,” Trump had said in October, citing the deal as “an example of the power structure I’m fighting.”
But the mixed-messages prevail with respect to Bayer and Monsanto’s proposed $66 billion merger, when Trump met with them at the Trump Tower in Mid-January. The (at the time) president elect seemed to consider the deal, asking for commitment from the German chemical company and U.S. seed giant in the name of the U.S. economy. Namely: $8 billion in new research and development, 3,000 new jobs and a commitment to keep 9,000 other jobs in the United States, should the merger succeed.
According to White House press secretary Sean Spicer: “The reason for this commitment and expansion is because of the president-elect’s focus on creating [a] better business climate here in the United States, which has already increased consumer and small business confidence since the election.”
Got it. But does he need to be so hands on?
As Richard Painter, a top ethics lawyer in the Bush White House, told Politico: “There’s nothing illegal about the president discussing an individual merger, but it’s practically unheard of and not a good idea.”
Fair point. And what’s the deal with the Dow-DuPont merger? DuPont chief Ed Breen said he wasn’t too concerned with Trump’s rhetoric on mergers and right around that time Dow Chemical’s CEO Andrew Liveris was named manufacturing adviser.
“It can start to look like the president is playing favorites and can send all sorts of mixed signals to the business community. And he needs to be spending his time worried about big-picture details and not individual details,” added Painter. “He’s bringing too much of his New York deal-making style to the White House – there’s a separation of economic and political power, and economic deals don’t need to be made in the White House, and they need to be made free of political interference.”
From here out, there’s no question it’ll be a deal by deal basis – as it should be. But if Trump’s flair for erraticism is any indicator, it’s going to be an interest four years for mega-mergers.
By Andrew Seale