M&A Attorneys Optimistic About 2018 Activity

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By Liz Crampton

Deal attorneys predict that mergers and acquisitions activity will be robust in 2018 as companies are generally healthy and well positioned in the marketplace to buy up businesses.

Dealmaking could build on momentum from the final quarter of 2017, which saw deal volume for U.S. companies more than double from the third quarter to $628.2 billion, according to a Bloomberg Law analysis. Mergers of more than $100 million involving U.S. targets also increased 7.3 percent in the fourth quarter to 305 transactions, up from 284 in the third quarter.

Uncertainty on Wall Street dominated 2017 as companies took a cautious approach during the presidential election campaigns due to lack of clarity about what regulations and legislation to expect from a new administration. That uncertainty is subsiding, said Elizabeth Donley, an attorney at Hogan Lovells LLC.

Bloomberg Law’s analysis showed that deal volume returned to “normal” in the fourth quarter of 2017 after a decline in activity in the previous six months compared to prior years.

In the next year, Donley said to expect a convergence of industries as companies are doing more deals across markets. She pointed to Amazon Inc.’s prior purchase of Whole Foods Inc. as an example of what kind of deals to expect.

“Companies will continue to think creatively,” Donley said. She was part of a panel of M&A attorneys discussing the 2018 outlook at a Jan. 17 roundtable in Washington.

Complex Questions

Caution over ambitious dealmaking has not completely left boardrooms. “Vertical” deals across markets, like CVS Health Corp. and Aetna Inc.’s proposed $67.5 billion tie-up, raise “interesting and incredibly complex questions” for antitrust regulators, said Edith Ramirez, a former Federal Trade Commission chairman and partner at Hogan Lovells. Those concerns could lead to lawsuits to stop vertical deals, like in the Justice Department’s case to stop AT&T Inc.'s $85.4 billion bid to buy Time Warner Inc.

Business leaders are particularly interested in the outcome of the Justice Department’s challenge to AT&T and Time Warner, Ramirez said. The “million-dollar question in antitrust” is whether that case is fact-specific and unique or if the concerns about media deals of this kind extend beyond AT&T and Time Warner’s transaction, she said.

“All eyes in the antitrust arena are going to be poised on the upcoming trial in the AT&T and Time Warner matter and how that ultimately plays out,” Ramirez said.

Tax Reform a Boon

The recent tax system overhaul promises to bring huge impacts to businesses, said Jamie Wickett, a Hogan Lovells partner specializing in tax policy. It’s “hard to overstate the impact” of the tax law, he said. An assumption among businesses is that reform of the tax code will free up cash for potential deals or to pay down debt, Wickett said.

But attorneys and the business community are still “trying to get our arms around” the new law, said Jasper Howard, another tax attorney at Hogan Lovells.

To contact the reporter on this story: Liz Crampton in Washington at lcrampton@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com

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