Banking on a Trumpian Deal Bonanza? Not So Fast.

It’s all back on: That’s the natural interpretation of what a second Donald Trump presidency and Republican administration will mean for deal-making in the US. But mergers and acquisitions bankers shouldn’t spend the bonuses before they’re earned. If President Joe Biden’s blanket skepticism about M&A is out, the next era of merger control could be unpredictable and arbitrary rather than “anything goes.”

Under Biden and his interventionist Federal Trade Commission head Lina Khan, the default position has been to come down hard on acquisitions. The philosophy extended beyond protecting consumers from the risk of raised prices. The power of workers to get fair pay for their labor has also been a major concern. Even wealthy authors like Stephen King found succor, with the Department of Justice thwarting a publishing deal to maintain intense bidding wars for $250,000 manuscripts. That was consistent with similarly themed initiatives outside deal-making, like the FTC’s moves to ban non-compete clauses in employment contracts.

Some rowback from the anti-M&A stance was expected regardless of whether Trump or rival Kamala Harris won the White House. Both candidates had backers who want Khan replaced — from Tesla Inc. billionaire Elon Musk to LinkedIn co-founder Reid Hoffman. A more pronounced easing of merger approvals would typically be anticipated under Republicans. Concrete changes could include raising the threshold for what qualifies as a problematic transaction. There could also be a greater openness to settling antitrust cases by accepting divestments or commitments to run an acquisition in a way that supports competition.

Such considerations doubtless contributed to stock-price gains for investment banks, which garner fees advising on transactions, in the aftermath of Trump’s sweeping victory.

A dialing back of the Biden-era approach could, in fact, make some sense. A predisposition to blocking takeovers may sound good for consumers and workers. In practice, the sheer time and expense involved in antitrust probes is an argument for greater selectivity. Kroger Co.’s $25 billion takeover of rival supermarket Albertsons Cos, creating a bigger challenger to Walmart Inc., is still awaiting a final ruling more than two years after the combination was announced. Probing deals by default risks having a deterrent effect on chief executives even attempting M&A. Why bother if a protracted regulatory fight is inevitable and a block is perceived as likely? Tie-ups that could be good for both customers and stockholders perhaps aren’t happening as a result.

The Biden approach was at least unambiguous. What comes next is far from clear. If Trump replaces Khan with his own appointment, that won’t necessarily mark a radical break with the current modus operandi. Vice President-elect JD Vance has openly supported Khan, particularly in taking on the big tech firms, and backed some tighter curbs on M&A. It would be naive to think Trump, his sidekicks, Republican lawmakers and backers are aligned on antitrust.

“Some aspects of the current aggressive approach will stick,” says Jennifer Rie, senior litigation analyst at Bloomberg Intelligence. “Republicans no longer uniformly lean more business-friendly than Democrats.”

Moreover, history belies the idea that deal makers will get a free pass. The Department of Justice attempted to block AT&T Inc.’s takeover of CNN-owner Time Warner in 2017. That was highly ambitious — at issue was a so-called vertical merger involving companies occupying very different positions in the communications industry. The suit failed, but the fact it was launched remains significant.

Much, of course, depends on who ends up occupying key positions in the antitrust agencies. To the extent the president’s views in turn influence decisions, merger approval could become one slippery beast. As Rie suggests, enforcement could be “idiosyncratic based on President-elect Donald Trump's view of the companies or industries involved.” Bankers may cheer the end of a hardline policy questioning the value of deal-making. The risk is that what follows is driven less by a clear policy and more by whim. More From Bloomberg Opinion:

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Hughes is a Bloomberg Opinion columnist covering deals. Previously, he worked for Reuters Breakingviews, the Financial Times and the Independent newspaper.

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