Trump Could Make M&A Great Again, Key Stocks for Gains

Deregulation was a hallmark of Trump's policy framework, and his previous term saw M&A-friendly regulatory reforms. With Trump poised for a White House comeback and an M&A market primed to rebound, many market observers foresee a surge in deals over the coming years.

M&A activity is already showing signs of recovery. According to Dealogic, announced M&A deals in 2024 surpassed $1.4 trillion, up from $1.32 trillion in 2023, though slightly below 2022's $1.42 trillion. The number of deals in 2024 is still down 34% from 2021's record of 15,582 transactions totaling $2.5 trillion, a frenzy driven by pandemic-era stimulus and low-interest loans.

Under a Trump administration, deal volumes are expected to rise in 2025. The M&A market has been hampered by persistent high-interest rates and stringent regulations in recent years. As financing costs fall with lower interest rates, a robust economy, and potential easing of antitrust regulations under a Trump presidency, previously halted or rejected deals could be revived, and a flurry of new M&A activity may emerge.

Trump's appointments might be more open to M&A. Republican lawyer Andrew Ferguson has been nominated as the next Federal Trade Commission Chair, succeeding the deal-tough Lina Khan. Gail Slater is set to lead the Justice Department's antitrust division, replacing Jonathan Kanter. The FTC and DOJ share antitrust enforcement responsibilities.

Morgan Stanley analysts suggest that Ferguson and Slater may adopt a more traditional, lighter-touch antitrust approach. "This should drive up animal spirits and improve corporate clarity in an M&A environment where market conditions are already supportive for activity," they wrote.

Additionally, smaller M&A transactions might thrive, potentially benefiting regional banks and small-cap stocks. Former Barclays CEO Bob Diamond, now leading a firm focused on U.S. banking consolidation, anticipates significant deals among banks with assets under $50 billion. After 2023's high-interest rates and deposit outflows impacted larger banks, the regional banking sector, comprising over 4,000 smaller U.S. banks, is ripe for consolidation.

The tech sector's prospects remain debated. Some analysts suggest Trump might adopt a more tech-friendly approach than Biden, reducing barriers for large M&A deals, potentially boosting the broader market, as tech stocks are key components of benchmark indices. However, data indicates that the number of TMT deals over $500 million was similar during Trump's previous term and Biden's.