What’s Next for the Deal Boom?

“Some of the new approaches on the regulatory front, antitrust in particular, will likely wind up being adjudicated by the courts one way or another,” said Peter Orszag, the C.E.O. of Lazard’s financial advisory business. He added that the flurry of legal challenges was a primary reason that many of the deals announced last year involved $10 billion or less. Relatively small deals are considered less likely to draw opposition from regulators.

Some M.A. practitioners say the blitz of litigation is a strategy for changing regulations. A string of company losses in these cases could help buttress efforts by lawmakers like Senator Amy Klobuchar, Democrat of Minnesota, to toughen up antitrust laws.

Tougher antitrust scrutiny isn’t confined to the United States: The European Union’s regulators are cracking down as well, raising objections to deals, including Illumina’s.

The prospect of being tied up in months of fights with regulators could make corporate leaders reluctant to pursue deals. “It’s becoming more of a topic of discussion, especially for public company boards on whether they can take that risk,” Ms. Aiyengar said.

Costs

For years, rock-bottom interest rates have made borrowing the billions necessary to finance an acquisition fairly inexpensive. As inflation rises rapidly, that era is likely to end soon.

Federal Reserve officials last month weighed raising interest rates faster than expected, and the anticipation of higher borrowing costs could deter some corporate boards from moving ahead with a deal, some practitioners said. Higher interest rates could also hit private equity firms, which often rely on access to cheap borrowing to do their core deal-making.

“If inflation continued to ramp up, and there were some volatility on interest rates, that could have an impact,” said Stephan Feldgoise, Goldman Sachs’s global co-head of M.A. But he quickly added that he believed this might not be a huge threat.

Article source: https://www.nytimes.com/2022/01/08/business/dealbook/deals-2022.html