The M&A picture: Deregulation vs Antitrust in Trump’s America

Raghav Motwani

Following Donald Trump’s election, US Merger and Acquisition (M&A) activity has begun to boom, with Wall Street expecting activity to surge in the coming months. On December 9th, labelled ‘Merger Monday’, $35 billion in deals were announced in a clear vote of confidence for the Trump administration.[1] JPMorgan CFO, Jeremy Barnum said the US is in an “animal spirits moment”, and the slow deals environment of the previous few years is ready to reverse.[2] Despite this optimism, the Biden administration challenged the anti-trust status quo, and there is no guarantee Trump’s administration will reverse this. Is the excitement about an M&A comeback justified, and how much will the Trump administration reverse the dealmaking drought?

History of US Anti-Trust Regulation

The Sherman Act (1890) was the first piece of legislation passed in a move to break down the monopolies that had formed in the nineteenth century. Men such as Andrew Carnegie, Cornelius Vanderbilt, and John Rockefeller grew affluent, at the expense of ordinary Americans. Infamously, John Rockefeller’s Standard Oil controlled over 90% of US oil production and dominated the processing and transportation of oil.

Subsequently, Theodore Roosevelt would spearhead an anti-monopoly campaign during his presidency, resulting in the Clayton Act (1914) which fortified the language of the Sherman Act, explicitly outlawing “anticompetitive practices”.[3] In the same year, the Federal Trade Commission (FTC), was established to contest M&A that would reduce competition. The focus of early anti-trust legislation was clearly on the effect on market competition, in Senator John Sherman’s own words the legislation was implemented to counteract the “inequality of condition, of wealth and opportunity”.

The next major change in the anti-trust policies of the USA came in the 1966, when Robert Bork published “Legislative Intent and the Policy of the Sherman Act”, often cited as the most influential anti-trust paper ever.[4] Bork argued that anti-trust legislation was intended to focus on “consumer welfare”, and the government should use consumer prices as the main parameter to judge if a deal was anti-competitive. His work helped establish a legal precedent that the FTC must prove a deal will lead to consumer prices increasing, resulting in fewer blocked deals. This definition was adopted by ‘Reaganomics’ and led to a period of significant M&A activity throughout the 1970s and 80s. The legal precedents of this period have remained steadfast, however, the 2020s are providing the first real challenges to this interpretation.

M&A under the Biden Administration

Despite a characterisation of the Biden administration as anti-M&A, 2021 was an outstanding year for M&A (Figure 1). M&A saw a downturn from 2022 onwards, however this was not wholly due to a deal-sceptic administration. US interest rates began to rise in March 2022, increasing the cost of capital to firms looking to finance deals. Additionally, inflationary pressures and geopolitical tensions further disrupted markets, reducing firm’s appetite for deal-making.

Figure 1 - Statista

The portrayal of deal-scepticism within the Biden administration was supported by the appointments of Lina Khan to the FTC and Jonathan Kanter to the Department of Justice (DOJ), who were both seen as far-left choices. John Foley of the FT labelled Khan and Kanter’s approach as ‘hipster anti-trust’, for taking considerations beyond the Bork orthodoxy of “consumer welfare” into consideration.[1] Khan and Kanter’s views echoed the original sentiments of Sherman, focusing on broader market competition.

In 2022, the $2.2 billion merger of publishers Penguin Random House with Simon & Schuster was blocked on such grounds. Rather than focusing on consumer prices, the administration argued that there would be less competition for novelists to choose between publishers, which would be realised in lower advances for authors. The deal’s dissolution saw Penguin pay a $200 million termination fee to Paramount, the owner of Simon & Schuster.[2]

The FTC and DOJ also notably came to loggerheads with Big-Tech: from attempting to block the acquisition of Activision Blizzard by Microsoft, to suing Amazon, and calling for the breakup of Alphabet. Khan’s critics claimed the FTC’s lawsuit against Amazon was a personal vendetta, referring to a 2017 academic paper where Khan called for Amazon to be broken-up.[3] The assault against big tech firms highlights the administration’s broader anti-trust mandate, arguing that Amazon’s monopoly was not only harming consumers, but rivals and sellers on their platform.

It is unsurprising therefore that M&A activity fell between 2022 to 2024. As highlighted by the $200 million Penguin termination fee, the potential downside risk of a blocked deal can mean dire consequences. Currently, the Financial Times suggests that M&A as a percentage of GDP sits around 14%, representing a level significantly lower than the historical average of 20%.[4]

‘Animal Spirits’, under the Trump Administration

Donald Trump’s persona as a self-styled ‘dealmaker’ leads expectations for this administration’s policy towards deals. Wall Street expects the Trump administration to remove red tape and provide a deregulated landscape fertile for M&A activity.

Replacing Lina Khan at the FTC is Andrew Ferguson, the former solicitor general of Virginia. Ferguson has been publicly hawkish on Big Tech, questioning how platforms affect freedom of speech and where censorship policies can violate anti-trust regulation. In a Truth Social post about Ferguson, Trump noted “Andrew has a proven record of standing up to Big Tech censorship and protecting Freedom of Speech”. Ferguson’s rhetoric has consistently gone above and beyond the Bork orthodoxy of “consumer welfare” in his interpretation of anticompetitive behaviour, interpreting challenges to free speech as a challenge to competition. While Ferguson is unlikely to have issues with smaller scale M&A, there is potential that he will be unfriendly to any expansion in the powers of Big Tech through inorganic growth.

On the other hand, Gail Slater who replaces Kanter as the Assistant Attorney General is a long-term advisor to Vice President JD Vance. Both Vance and Slater have actively spoken out against Big Tech, with the Vice President praising Khan’s aggressive antitrust policy towards Big Tech.[5] In Trump’s Truth Social post announcing Slater’s nomination, he wrote that under her the DOJ would “crack down” on Big Tech which had “run wild for years”. However, we can expect a more balanced approach from Slater, who left the FTC to work as general counsel to the Internet Association in 2014, a lobbying group that argued against government interference with tech companies. Slater can be expected to take a nuanced position within the DOJ as she oversees the cases against Alphabet and Amazon that have been inherited from the previous administration.

The Trump administration faces a struggle of ideologies, as the President has linked himself to an open deal environment and will be expected to promote deregulation. On the other hand, the populist commentary that led to his election echoes the anti-Big Tech sentiments of both Fergusson and Slater. Their attitude to anti-trust suggests that consumer prices will not return as the barometer from which anti-competitiveness will be judged. How this dichotomy will be resolved is the key question when assessing how the M&A environment will develop during Trump’s second term.

Despite challenges, Wall Street looks set to have a strong 2025. A reversion to the historical average, with M&A worth 20% of GDP represents significant and strong growth. However, the “animal spirits” and free-for-all that many hoped for as Trump ripped up the aggressive anti-trust policies of the Biden administration seems unlikely. Ferguson and Slater provide challenges to deregulation, where observers should expect the administration to be hostile to Big Tech deals. The changing culture within the FTC and DOJ to anti-trust looks set to stay, as the idea that consumer prices are the beginning and end of anti-competitive behaviour has been fundamentally undermined. The M&A environment looks set to recover, but the era of unchecked megadeals is unlikely to make a return in the short term.

[1] https://www.ft.com/content/7d3ddb3a-af37-4ed4-b1db-c8d2db457a14

[2] https://www.reuters.com/markets/deals/penguin-random-house-scraps-22-bln-deal-merge-with-simon-schuster-2022-11-21/

[3] https://www.ft.com/content/5b27f142-613f-437c-890d-7abe1be6d819

[4] https://www.ft.com/content/7d3ddb3a-af37-4ed4-b1db-c8d2db457a14

[5] https://www.winston.com/en/blogs-and-podcasts/competition-corner/trumps-selection-of-gail-slater-to-lead-antitrust-division-provides-initial-insight-into-enforcement-priorities

[1] https://www.ft.com/content/01eb5105-bf2b-48dc-9aa5-00d470dcf908

[2] https://www.ft.com/content/54f93b51-7769-41ec-8015-52780dba69f1

[3] https://www.culawreview.org/journal/the-rise-and-fall-of-antitrust-why-antitrust-revival-is-a-legal-necessity

[4] Ibid.