Trump 1.0 was as tough on M&A as Biden. Trump 2.0 may not be different.
11/12/2024 16:10
The business world is expecting M&A to loosen up under President Donald Trump. It could be in for a surprise — if history is any guide.
The business world is expecting M&A to loosen up under President Donald Trump.
It could be in for a surprise — if history is any guide.
Trump’s first term in office was arguably just as tough for corporate mergers as the term of President Joe Biden, as measured by the number of merger enforcement challenges brought by the Justice Department and the Federal Trade Commission.
Between fiscal years 2017 and 2019, a period that roughly corresponds with Trump’s first three years in office, DOJ and FTC brought 118 such challenges, according to annual reports issued by the agencies.
That was a higher cumulative total than the 108 brought between fiscal years 2021 and 2023, a period that roughly corresponds with Biden’s first three years in office.
Biden, however, did achieve the highest single-year total of 50 challenges in fiscal 2022 — the largest annual count in more than two decades.
"While we can expect robust deregulation" in a new Trump administration, "we shouldn’t necessarily expect this laissez faire attitude to spill over into the antitrust realm," said Danny Karon, an antitrust lecturer and advisory board member of Loyola University Chicago School of Law's Institute for Consumer Antitrust Studies.
Justin Stewart-Teitelbaum, a partner in the Freshfields law firm who specializes in antitrust, said he anticipates the Trump-Vance administration to continue merger scrutiny at a rate similar to Trump's first term, but with a focus on negotiating resolutions rather than litigating cases.
“Given Trump and (Vice President-elect JD) Vance’s embrace of populist themes, we anticipate continued scrutiny of mergers, although not an inherent skepticism of M&A activity," Stewart-Teitelbaum added, noting that he expects the new administration to encourage divestments and protect against post-acquisition layoffs.
What most observers do expect to happen is for the new administration to remove Biden-appointed FTC Chair Lina Khan, who challenged several high-profile corporate mergers during her time as boss of the FTC and emerged as a public foe of major American companies.
Trump is "certain" to fire Khan, Karon said,
But a new FTC chair would not necessarily be averse to the government's pursuit of several Big Tech antitrust cases against Google (GOOG, GOOGL), Apple (AAPL), Amazon (AMZN) and Meta (META).
"Several of these cases were initiated during Trump’s first term; plus, he’s no fan of Facebook," Karon said of Trump.
There could be some early signs in the next month of which way the Trump administration is leaning, based on who gets top jobs at the FTC and DOJ's antitrust division.
One figure who will have a hand in those decisions is antitrust technology attorney Gail Slater, an aide to Vice President-elect Vance. She, is advising Trump's transition team on a replacement for Khan, according to a report by Bloomberg.
The candidates being considered for top jobs include Alex Okuliar, an antitrust lawyer who was part of the DOJ's initial Google investigation that resulted in a lawsuit against the online search giant during Trump's first term. Okuliar served as deputy attorney general in the department's antitrust division.
Another way to gauge the M&A aggressiveness of the next administration is the number of "second requests" the DOJ and FTC issue to companies looking to merge.
So-called second requests are significant in that they allow the regulators to conduct an in-depth investigation of a proposed merger or acquisition if the tie up raises competitive concerns. That triggers the possibility of a formal merger challenge.
Second requests are considered a burden that tends to deter M&A activity, due to the delays they cause and expenses associated with complying.
Such second requests did dip under Biden following a flurry of enforcement actions in 2022, according to financial consulting group Cornerstone Research.
Cornerstone attributed the decrease to fewer actions taken by the DOJ, which filed 11 second requests in fiscal 2023, spending much of its time prosecuting more high profile antitrust cases.
"This is half as many as the prior year and by far the lowest number over the prior 20 years," Cornerstone said in a report
On a percentage basis, second requests were also more prevalent under Trump's first three years, happening in 2.6% to 3.0% of merger transactions reported. Under Biden, second requests were issued for 1.9% to 2.1% of reported transactions.
A total of 157 second requests were issued during the years that roughly correspond with Trump's first three years in office. During the years that roughly correspond with Biden's first three years in office a total of 149 second requests were issued.
Both the Trump and Biden administrations were also aggressive in challenging companies on competition concerns, alleging monopoly behavior.
In fact, it was Trump’s first administration that initially sued Google on antitrust grounds, citing Section 2 of the Sherman Antitrust Act of 1890.
The Biden administration took over the case, leading to a ruling by a district court judge in August that the tech giant illegally monopolized the search engine market.
Section 2 prosecutions had had been dormant since 1998, when the DOJ under former president Bill Clinton sued Microsoft (MSFT).
It was also Trump’s first administration that sought to block AT&T's (T) merger with Time Warner, unwind Meta’s acquisitions of Instagram and WhatsApp, and that launched an investigation into Apple, leading the Biden administration to sue the iPhone maker earlier this year.
But Biden's DOJ and FTC took Section 2 even further.
The DOJ sued Google in a second antitrust case over online advertising technology, and pressed forward with lawsuits against Live Nation (LYV) and Visa (V). The FTC filed similar charges against Amazon (AMZN).
There’s no guarantee that a second Trump administration will be as aggressive as the first.
The business world is expecting some relief. The days following Trump’s win were marked by run ups in the stocks of some companies currently facing antitrust or merger challenges and predictions that the corporate deal making environment is about to get much better.
And for good reason. Trump has promised pro-business policies like eliminating burdensome regulations, cutting corporate tax rates, and dethroning cryptocurrency skeptic SEC Chair Gary Gensler.
Several big tech CEOs, including Apple's Tim Cook, offered public and private praise to Trump following his election victory.
But when it comes to scrutinizing corporate tie ups, investors expecting something different may be in for a surprise.
"Some of the perceptions on these stock moves — that we're hearing about a new anti trust world — I thought, that may be a little bit of irrational exuberance," antitrust attorney Mark Wagoner told Yahoo Finance.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on X @alexiskweed.
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