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mergers and acquisitions
Wall Street Giddy Over Coming Merger Boom as Trump Expected to Fire Lina Khan
One corporate CEO welcomed the Republican's victory as "an opportunity for consolidation."
Nov 08, 2024
Wall Street is "foaming at the mouth," as one leading business magazine put it, at the prospect of a corporate merger frenzy following Republican Donald Trump's victory in the 2024 presidential election—a win that's set to spell the end of antitrust champion Lina Khan's popular tenure at the helm of the Federal Trade Commission.
Trump's second administration, which is likely to be stacked with billionaires and corporate-friendly officials, is expected to take aim at merger and acquisition guidelines issued last year by Khan's FTC and the U.S. Department of Justice after decades of relentless corporate consolidation.
David Kostin, chief U.S. equity strategist at the Wall Street behemoth Goldman Sachs, predicted in a note published Wednesday that under Trump's incoming administration, "the regulatory posture of the Federal Trade Commission and the Department of Justice Antitrust Division that during the past four years challenged many proposed business combinations will likely be more relaxed."
That more relaxed posture, according to Kostin, could result in a 20% increase in merger activity in just the first year of Trump's second term.
Raul Gutierrez, the head of mergers and acquisitions at the investment banking firm Truist Securities, echoed Kostin's assessment, tellingBloomberg that "you should be able to see larger transactions move forward" under the incoming Trump administration.
"Some of these had been put on hold given the current antitrust stance," said Gutierrez, "and I think you'll see a greater willingness to test agencies out once the administration takes over."
Khan's term officially expired in late September, but she's expected to stay on at the FTC until Trump is inaugurated in January and chooses a replacement. While Vice President-elect JD Vance has praised Khan, "Trump and his allies are likely to get rid of anyone associated with the Biden administration's antitrust battles with the big Silicon Valley tech companies," The New York Timesreported earlier this week.
Tesla CEO Elon Musk, who pumped upward of $118 million into Trump reelection efforts, wrote days before the November 5 election that Khan "will be fired soon."
According to the FTC's latest data, the Biden administration brought a record number of merger enforcement actions in fiscal year 2022. A recent analysis by the American Economic Liberties Project found that the Biden administration "brought to trial four times as many billion-dollar merger challenges as Trump-Pence or Obama-Biden enforcers did."
Under Khan's leadership, the FTC has taken legal action against some of the most powerful companies in the world, including Amazon and Microsoft.
But Trump's election victory has sparked hopes on Wall Street that aggressive merger enforcement could soon end.
"We think that under a Trump administration, deal approvals will speed up markedly and the process will be more clearly delineated," Mark Fitzgibbon, managing director of the banking company Piper Sandler, wrote in a research note.
David Zaslav, the CEO of Warner Bros. Discovery, hailed Trump's victory as "an opportunity for consolidation."
Kroger, a company that is currently locked in a legal battle with the Khan-led FTC over its attempt to acquire competitor Albertsons, saw its stock price jump in the wake of Trump's election victory, with investors anticipating "a more lax environment for corporate mergers" under the Republican, Barron'sreported.
Axiosreported Friday that "the $35 billion credit card merger of Capital One and Discover will be a bellwether for how Trump's antitrust crew views the M&A environment."
"Shares of each company rose 15% after his election," the outlet observed, adding that shares of the airline companies Frontier and Spirit also surged in a "sign their previous attempt at a merger could be revived."
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Khanna, Schumer Lead Call for FTC Probe of Big Oil Consolidation
"Americans are paying the price for Big Oil's greed and are still struggling to keep up with gas prices higher than pre-pandemic levels."
Mar 06, 2024
U.S. Congressman Ro Khanna and Senate Majority Leader Chuck Schumer on Wednesday led dozens of congressional colleagues in urging federal regulators to investigate the recent historic surge in oil and gas industry consolidation.
In a bicameral letter to Federal Trade Commission (FTC) Chair Lina Khan, the lawmakers took aim at what analysts say is the biggest-ever wave of Big Oil mergers and acquisitions (M&A), which totaled a staggering $190 billion last year, including $144 billion worth of industry consolidation in the fourth quarter alone.
"Contrary to disinformation spread by industry groups, these deals are not about efficiency, international competitiveness, or lowering costs; they are designed to pump more profits out of Americans' pockets—plain and simple," the letter led by Khanna (D-Calif.) and Schumer (D-N.Y.) states. "Fossil fuel companies have overwhelmingly identified investor pressure as the reason to keep prices high so they can continue to benefit from record profits. Americans are paying the price for Big Oil's greed and are still struggling to keep up with gas prices higher than pre-pandemic levels."
The lawmakers urged the FTC to "consider all harms that past and future mergers present to American consumers" and "oppose any acquisitions it determines to be in violation of antitrust law."
The FTC is currently investigating last year's megamergers involving Chevron and Hess, ExxonMobil and Pioneer, and Occidental Petroleum and CrownRock.
"Oil and gas is undergoing a historic consolidation wave comparable to what occurred in the late 1990s and early 2000s giving rise to the modern supermajors," Andrew Dittmar, a senior vice president at the analytics firm Enverus, said earlier this year. "After a decade of lowered investment in exploration and with the major U.S. shale plays largely defined, M&A has become the preferred tool to replace declining reserves and secure longevity in these companies' profitable upstream businesses."
The lawmakers' letter warns that "if a small group of dominant firms is allowed to control this industry, American consumers and industry competition will only suffer."
"Therefore, we urge the FTC to extend its current investigations, open inquiries into these new deals, and take all appropriate actions to protect competition in this industry," the letter adds. "Lax enforcement during the last generation, such as allowing Exxon and Mobil to merge, resulted in market manipulation, unstable supply, and price hikes for Americans. We must avoid similar mistakes going forward."
The letter is backed by advocacy groups including Food & Water Watch, Public Citizen, Friends of the Earth, Center for Biological Diversity, Indigenous Environmental Network, Greenpeace USA, Zero Hour, and Sierra Club.
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Warren Calls On Regulators to 'Immediately' Block Capital One-Discover Merger
The Massachusetts Democrat said the $35.3 billion deal "threatens our financial stability, reduces competition, and would increase fees and credit costs for American families."
Feb 20, 2024
U.S. Sen. Elizabeth Warren on Tuesday led calls for federal regulators to "immediately" block Capital One Financial's $35.3 billion purchase of Discover Financial Services, warning that "this Wall Street deal is dangerous and will harm working people."
The proposed all-stock deal would create the nation's sixth-largest bank by assets in a credit card industry dominated by Visa and MasterCard. Capital One CEO Richard Fairbank called the acquisition "a singular opportunity to bring together two very successful companies with complementary capabilities and franchises, and to build a payments network that can compete with the largest payments networks and payment companies."
However, Warren (D-Mass.) warned that the proposed merger "threatens our financial stability, reduces competition, and would increase fees and credit costs for American families. Regulators must block it immediately."
The proposed acquisition comes days after the
publication of a new U.S. Consumer Financial Protection Bureau (CFPB) report revealing the "predatory" practices of credit card companies including Capital One, which charge interest rates that can exceed 30%. According to the CFPB, lack of competition "likely contributes to higher rates at the largest credit card companies."
Critics say the proposed merger will only make matters worse.
"The Capital One-Discover deal will create another colossal too-big-to-fail bank while supercharging consolidation in the credit card sector," Shahid Naeem, senior policy analyst at the American Economic Liberties Project, said in a statement. "Greenlighting the creation of the nation's sixth-largest bank and the largest credit card issuer is indefensible, particularly as the harms of bank and credit card consolidation are already causing enforcers and Congress to chart a stricter approach to both."
"It's time for bank regulators to step up and do their jobs to protect the safety and stability of the financial system, the economy, and the American consumer—starting with blocking this deal," Naeem added.
Liz Zelnick, who directs the economic security and corporate power program at the watchdog Accountable.US, said that "banking giants like Capital One have long exploited the lack of competition to price gouge families with predatory credit card interest rates and hidden junk fees."
"Even less competition under this merger means these companies will have less incentive to check their greedy practices that nickel and dime consumers into the billions of dollars," she continued. "Federal regulators should take a hard look into whether this deal runs afoul of antitrust rules at the expense of consumers."
"It's a reminder why the Biden administration's ongoing efforts to crack down on excessive and hidden junk fees from big banks are a critical step towards lowering costs for Americans," Zelnick added.
University of Michigan business law professor Jeremy Kress—a former Federal Reserve official who oversaw bank mergers—toldReuters that the deal "will provoke a significant pushback and receive heightened regulatory scrutiny."
"It will be the first big test of bank merger regulation since the Biden administration's executive order on promoting competition in 2021," he added.
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