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I’ve been talking to some of my banker friends* about their thoughts on the M&A market for 2017 under the new Trump administration. The general consensus is that there will likely be more M&A this year for the following reasons:
1. The Trump administration is projected to be very business friendly and will likely take the following steps that will lead to more cash in hand for larger corporations:
- Repatriation of cash trapped overseas in low tax jurisdictions. The idea here is that companies have cash in low tax jurisdictions that they do not want to bring back to the U.S. due to our corporate tax rate being higher than where they are generating the cash (in 2016, the U.S. had the third highest corporate income tax rate in the world). If the U.S. lowers its corporate tax rate, the idea is that these companies would bring that cash back to the U.S. and invest it in projects here. If Trump is able to influence corporations to invest that money back into the U.S., some of it will be used for acquisitions.
- Cheaper to borrow right now. Following the financial crisis, interest rates were lowered in order to stimulate corporate borrowing,…