In the world of dealmaking and shareholder activism, an annual conference in New Orleans has become the staple event.
This year, the optimism over the mergers and acquisitions environment is about as free-flowing as the Ramos Gin Fizzes.
Kurt Simon, global chairman of M&A at JPMorgan, gave the keynote address at the 29th annual Corporate Law Institute conference hosted by Tulane University Law School, which draws everyone from deal advisers to Delaware judges. He said there are upsides for M&A, stemming from the White House, Congress and rising talk about infrastructure spending and tax cuts.
He even said that JPMorgan believes the market is not far away from seeing its first $100 billion all-cash deal.
Simon’s optimism was echoed in a survey by the public relations firm Brunswick Group, which found that 44 percent of 120 dealmakers surveyed expect merger activity to increase this year. That compares with only 13 percent last year.
Brunswick attributed dealmakers’ confidence to policies expected from the Trump administration.
Does Trump help deals — or hurt them?
Others, however, are less convinced that President Donald Trump’s policy ideas will be a positive for dealmaking. Leo Strine, chief justice for the Supreme Court of Delaware, spoke with his usual candor,saying that protectionist U.S. policies could prompt Europeans and others outside the United States to think inwardly as well.
“You can play a game like Putin, where all the stooges on the other side let you score,” he said. “I don’t know that to be global capitalism.”
The uncertainty surrounding the administration could cause companies to delay their deals, several panelists said. Simon noted on a panel that tax reform is a “near-term negative” for dealmaking, citing several situations where boards considering selling their companies for cash may defer. For example, lower taxes could lower sellers’ expenses, and thereby increase their valuations. To sell now could mean giving up future upside.
It’s less of an issue for buyers, he said, when they can figure out “synergies” that make the math work.
M&A in an age of populism
Synergy is another buzzword getting a second look during the Trump administration. That is because synergies — or cost cuts that can be derived from combining two companies — often lead to job losses.
That could be a much larger problem in America’s populist environment, said George Bason, global co-chairman of M&A at law firm Davis Polk & Wardwell.
“At least for the next year, there are not going to be a lot of companies willing to stand in front of a freight train,” Bason said.
But some brave companies will still be willing to do kickoff mergers and buyouts, given that the economic conditions are ripe. Simon said he expects an increase in unsolicited takeover offers as well.