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U.S. Election Day – What’s Going To Happen For M&A?

Given that, historically, the official kickoff of the U.S. presidential election typically commences with the Labor Day holiday, one of the notable financial developments in this current election season has been the remarkable pace of announced U.S. merger and acquisition activity.

According to S&P Global Market Intelligence data, since Labor Day 2016, $494 billion in U.S. M&A transactions has been announced, lead by AT&T Inc.’s proposed $109.4 billion acquisition of Time Warner Inc., and British American Tobacco p.l.c.’s $59.6 billion offer to purchase the remaining 57.8% stake in Reynolds American Inc. That amount of announced U.S. M&A represents a historic high for deal activity occurring during a U.S. presidential campaign season.

As indicated below, our examination of the seven previous election cycles since 1988 reveals that the strongest period of U.S. M&A occurring during a presidential campaign, prior to this one, was in 2012, when $325.2 billion in deals took place between September 3 and November 6 of that year.

Yet, in the aftermath of a campaign, what can market participants anticipate for the balance of the year with regard to merger and acquisition activity? An examination of historic post-election M&A activity reveals mixed results. In four of the previous seven election cycles, U.S. M&A endured double-digit percentage declines in deal value from the post-Election Day period to year-end, compared to the amount of M&A occurring from Labor Day to Election Day. Additionally, on only two occurrences among the past seven campaign observations noted below, 1992 and 2004, has U.S. M&A deal value posted a double-digit percentage gain in the period following the election to year-end.

Of the two previous strongest periods for M&A during an election campaign where U.S. M&A posted exceptional strength, in 2000 and 2012, deal activity dropped by an average of about -48% in the period following Election Day to year-end. Should that degree of deal contraction occur following the amount of U.S. M&A that has transpired this campaign season, it would be reasonable to see about $250 billion in deal activity for the remaining of the year. While that would represent a significant drop from the deal activity that has taken place over the past nine weeks, it would nonetheless be an exceptionally strong amount of M&A occurring in the post-Election Day to year-end period.

M&A change

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