rgeM&A practitioners anticipate a ‘Trump bump’

The scale of Donald Trump’s victory in the presidential election – and the fact the Republicans now have full control of Congress – has been greeted with optimism by U.S. dealmakers. In the wake of the election, the U.S. stock markets generally – and shares in big investment banks in particular – have surged, partly in anticipation of a deregulation-driven M&A boom.

Market participants appear to be betting that Trump’s plan to lower taxes, reduce the regulatory burden certain industries face and decrease the overall size of the federal government will have a positive impact on the U.S. economy, overcoming any potential inflationary spike caused by higher import tariffs and the tightening of immigration laws. The incoming administration is also set to create a merger review landscape that is more favorable to M&A, which we explore in more detail below.

Election set to boost tech-related deal-making

While the President-elect has been critical of some big tech companies, his return to the White House is being seen by prominent investors as good for the tech sector more broadly, particularly businesses involved in artificial intelligence and digital assets.

Amid expectation of a wave of lucrative government contracts, less tech-related regulation in certain areas and a boost from Trump’s desire to improve government efficiency, the media have reported founders being encouraged to pitch ideas to investors that have previously been challenging. These include businesses that sell software to federal agencies, or that develop fintech products for regulated entities such as insurers or investment banks.

Less government intervention in AI development

The Trump administration is expected to give AI companies greater scope to self-regulate while at the same time controlling the flow of AI and related technologies to China. Indeed the 2024 Republican Party Platform states the GOP’s desire to see AI development rooted in "free speech and human flourishing".

The President-elect has voiced his support for open-source AI models and has said he will repeal his predecessor’s Executive Order on Safe, Secure and Trustworthy AI. This invoked the Defense Production Act to require companies developing foundation models to share information with the government.

The new administration may also seek to follow a less risk-averse approach to the development of AI for national security purposes than is set out in President Biden’s National Security Memorandum on AI, which is designed to “galvanize federal government adoption of AI to advance the national security mission, including by ensuring that such adoption reflects democratic values and protects human rights, civil rights, civil liberties and privacy”. That said, elements of the Memorandum support the President-elect’s policy vision, including its commitment to double U.S.electrical capacity to support greater AI deployment.

The President-elect may also seek to promote the export of U.S. technology to allies, particularly in the Middle East, that are seeking to build their own sovereign AI infrastructure and ecosystems. Senior political appointees who served in the last administration will recall China’s effectiveness in deploying telecommunications infrastructure throughout the world, and the new administration will be keen to prevent that from happening with AI, while at the same time maintaining stringent controls over exports of advanced technology to the PRC.

Less government intervention in AI development could spark increased transactional activity, with companies pursuing strategic acquisitions to enhance their AI capabilities and tech giants engaging in M&A to bolster their competitive positions.

While critical of President Biden’s Chips Act – enacted to shore up domestic investment in semiconductor manufacturing – industry analysts are predicting the Trump administration could retain the program, albeit with some changes to the way funding is distributed. The Act gained bipartisan support in Congress when it was passed in 2022.

Another area where we expect to see change is in relation to cryptocurrencies and digital assets. Under President Biden, the Securities and Exchange Commission (SEC) and the Treasury Department have cracked down on crypto companies for alleged violations of securities and anti-money laundering laws, while banking regulators have discouraged lenders from entering the market.

The SEC has several pending litigations against crypto issuers, crypto platforms and crypto traders, many of which involve registration issues relating to whether or not the relevant crypto unit or token was in fact a security (our podcast from earlier this year explains the detail of some key recent cases).

President-elect Trump has nominated crypto advocate Paul Atkins to take over as chair of the SEC, and we therefore expect these cases to be phased out under the new administration.

Criminal crypto enforcement is also likely to be less of a priority at the Department of Justice (DOJ), particularly the sort of cases brought under the Bank Secrecy Act that we have seen in recent years.

Additionally, Republicans are expected to use their control of Congress to further develop the U.S. regulatory framework for digital assets, particularly if the pro-crypto Republican Senator Tim Scott is named chair of the Senate Banking Committee.