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By Liz Crampton
Mega-deal activity in the U.S. has slowed as doubt continues about President Donald Trump’s administration’s direction, according to M&A and antitrust attorneys.
A lack of permanent antitrust leadership has created uncertainty on Wall Street about dealmaking. That unease could mount as there’s no clear timetable for when the Senate will confirm the Justice Department’s antitrust nominee and when the White House will name its picks for the Federal Trade Commission.
“You would expect it to be pretty robust and business friendly administration. But frankly, there’s a lot of heads still missing in key positions in the government, and what it really looks like going forward is not clear,” said David Gibbons, a partner at Hogan Lovells LLC, at a roundtable Sept 7. “The defining thing in the [U.S.] around the M&A environment is uncertainty.”
Nearly eight months into Trump’s administration, the Senate still hasn’t taken up the nomination of assistant attorney general for the Justice Department’s antitrust division, Makan Delrahim. The FTC has been run by an acting chairman since January, and three of its five seats remain empty.
In addition, Congress’s recent failed attempt to repeal Obamacare may have stalled mergers in the life sciences, Gibbons said, because the health care law offered an “impetus for activity” in that arena. The prospects for tax reform could also impact M&A in the U.S. “But who knows what that’ll look like?”
Overall, the M&A market has stayed relatively strong over the past six months, and the pace of acquisitions of U.S. targets has been brisk, according to a Bloomberg BNA analysis. But most of the action is happening with mid-level market transactions. Mega-deal volume declined 34 percent in the first quarter of 2017 — the first quarter-over-quarter decline in nearly a year.
Antitrust attorneys generally agree that antitrust enforcement doesn’t shift dramatically when moving from a Democratic to a Republican administration because the legal analysis is still the same.
Most of the changes that will occur will be “on the margins,” said Logan Breed, an antitrust partner at Hogan Lovells.
Companies could see less scrutiny from regulators on vertical deals that don’t involve direct competitors, he said. The agencies under Trump may also be more open to arguments from merging companies that their transactions will lead to “efficiencies” like cost-savings or improved innovation, he said.
“We’ve had some clients starting to think about deals they might not have contemplated doing if the election had gone the other way,” Breed said.
Despite the short-staffed antitrust agencies, the government has plodded along with its work. Dow Chemical Co. and DuPont Co.'s tie-up passed regulatory muster in June. The DOJ under Trump won its first antitrust trial in June when a judge agreed with the government to stop the proposed merger of two competing nuclear waste companies.
The FTC forced Walgreens Boots Alliance Inc. and Rite Aid Corp. to back down from their initial merger plan, prompting the companies to try again for regulatory approval in submitting a revised deal. The deadline for an extended inquiry into their new acquisition plan is Sept. 18.
The delay in Delrahim’s nomination is explored this week in Liz Crampton’s antitrust blog. Follow her on Twitter @liz_crampton.
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