Companies wrestle with when to merge as they assess Harris and Trump
10/25/2024 15:19
Companies are in the dark about how exactly antitrust enforcement would shift under a new administration, upending merger plans until a 2024 outcome is certain.
Companies are in the dark about how exactly antitrust enforcement would shift under a new administration, upending merger plans until a 2024 outcome is certain.
Chip maker Qualcomm (QCOM) has paused considerations to acquire struggling chip maker Intel (INTC), according to a report by Bloomberg, a delay intended to help the company evaluate the new administration’s approach to antitrust enforcement and US-China relations.
Oil giant ConocoPhillips (COP) is also hoping to push the closing of its Marathon Oil (MRO) acquisition to after the inauguration of a new president, according to a report by The New York Times.
Another big deal that hangs in the balance during this red-hot political season is the union of credit-card lenders Capital One (COF) and Discover (DFS).
Capital One CEO Richard Fairbank told analysts Thursday that he expects to complete the tie-up "early in 2025 subject to regulatory and shareholder" approvals.
The New York Times earlier reported that the companies hoped for a close by Dec. 31 because of concerns that Donald Trump might look unfavorably upon their merger if he were to win.
New York Attorney General Letitia James may have scuttled chances for an earlier close. On Wednesday, James announced a probe into whether the Capital One-Discover tie up would harm New Yorkers.
"We continue to work through the regulatory approval process, and we’re fully mobilized to plan and deliver a successful integration," Fairbank added Thursday in an earnings release.
The problem for any business considering M&A activity at the moment is that little has been said on the campaign trail by either Vice President Kamala Harris or former President Trump about how they would mold the agencies that police US competition laws: the Justice Department and the Federal Trade Commission.
What’s more, changes to the agencies’ antitrust guidelines and public sentiment could mean the tea leaves won’t be easy to read no matter who wins the White House.
“The problem for the businesses is what kind of person will have these jobs at both the DOJ and FTC,” said Yale economics professor Fiona Scott Morton.
Greg Bader, an antitrust lawyer and shareholder with Gunster, said his firm has continued to see potentially reportable M&A transactions, but with the pending election “you really don't want to start a merger now…when it's so murky.”
Barclays analyst Jason Goldberg said he thinks getting through the US election "irrespective of who wins" could be positive for overall corporate investment banking activity.
"Corporates will just have a better sense of which policies they're going to be confronting over the next four years," he added.
There are some reasons to believe that both candidates could take a tough stance on corporate mergers.
While Harris has not publicly revealed her antitrust posture, Bader and Scott Morton said they expect the vice president would continue President Joe Biden’s wide-ranging effort to rein in what his administration views as anti-competitive behavior across a number of industries.
On Thursday the White House announced a new investigation into competition in air travel, after successfully blocking three airline mergers in four years.
The administration has also alleged anticompetitive conduct by tech giants Apple (AAPL) and Amazon (AMZN) and claimed that Microsoft's (MSFT) acquisition of gaming giant Activision Blizzard would create a gaming market monopoly (a tie up that a district court declined to put on hold at the FTC's request).
The FTC, led by Chair Lina Khan, has won some victories, too, including a decision Thursday by a US judge to block the pending $8.5 billion merger of handbag and accessories maker Tapestry and Capri.
The agency also challenged the tie up between grocery chains Kroger (KR) and Albertsons (ACI), which is now pending. On the campaign trail Harris has specifically named food and beverage company consolidations when discussing how she would increase regulatory scrutiny as president.
But Trump could support some of these cases, based on his past actions. One of the Biden administration’s key antitrust victories — over search giant Google (GOOG, GOOGL)— was a case initially filed by Trump’s Justice Department, alleging the tech giant illegally monopolized the search engine market.
Skadden, Arps, Slate, Meagher & Flom noted that Trump’s administration took several actions to bolster antitrust enforcement, raising novel theories to challenge vertical mergers, creating the FTC’s Technology Task Force, and opening investigations into Google, Amazon, Facebook (META), Apple (AAPL) and Microsoft.
Scott Morton, on the other hand, said she would expect Trump to lean into a Republican preference for corporate profits by “allowing anybody to merge who wants to.”
Otherwise, she expects the former president to make exceptions to exact retribution against those he perceives as rivals, citing the DOJ’s challenge to AT&T’s acquisition of CNN and alleged crackdown on marjuana company mergers.
The Justice Department has said it may recommend to a federal judge a break up of Google as an antidote to unhealthy competition in the search engine market.
In a recent interview conducted by Bloomberg's editor-in-chief before the Economic Club of Chicago, Trump suggested that Google’s punishment could be accomplished without forcing it to sell off parts of its empire.
“What you can do without breaking it up is make sure it’s more fair,” Trump said in that Oct. 15 interview. The former president described Google’s search engine as “rigged” and expressed concern that consequences for Google in the case could favor China.
Other antitrust lawyers predict that Trump may take a lighter approach to M&A and monopoly conduct challenges.
Schwabe shareholder Matt Bisturis predicted that a new Trump administration would likely “de-emphasize regulatory scrutiny, and go easier on private equity roll-ups.”
Barry Barnett, an antitrust litigation attorney with Susman Godfrey, pointed out that although people at the top of the Trump administration may be less aggressive in the kinds of cases they bring and may be willing to resolve them without seeking break ups, enforcement will be impacted by other influences.
Even a second Trump administration could look different, Barnett said, because the DOJ and FTC repealed vertical merger guidelines drafted under the Trump administration and replaced them with a more lenient standard to presume mergers are illegal.
And Barnett and Scott Morton agreed that judges are changing the way that they evaluate antitrust cases, too, by shifting away from defendant-friendly interpretations of the consumer welfare standard.
"That general social understanding that we have a problem and we need to move our policy levers to fix that problem undoubtedly affects judges as well," Scott Morton said, "because they're in charge of looking at evidence, and the evidence is really, really strong."
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on X @alexiskweed. Yahoo Finance's David Hollerith contributed to this report.
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