The post-election pickup

Happy Election Day!

Whichever direction today takes us, the results of the 2024 US presidential election could have broad—both known and largely unknown—implications for private market fund managers and their investors.

The difference between a Donald Trump and a Kamala Harris victory could make for contrasting futures for private equity investments in healthcare, large proposed acquisitions by big tech companies and the expansion of clean energy technology—to name a few hot-button issues.

But amid the uncertainty, there is one thing we can look forward to, regardless of the winning party, and that is the historically documented post-election bump in M&A closings. According to a PitchBook analysis of the presidential cycles of 2020, 2016 and 2012, PE- and corporate-backed deal closings tend to surge in the December following an election—likely the product of deals that were originally postponed because of political uncertainty.

The analysis found that, in the 11-week span before and after the last three US presidential elections, the number of US deal closures per week remained within a fairly consistent range of 400-1,000. In election years, the drop-off in activity tends to happen in August and September; by October and November, figures evened out.

PitchBook analysts attribute the trend to the fact that most GPs price election risk into their portfolios and deal structures long before the election itself.

At the same time, as we discussed last week, M&A deal value and count are already tracking ahead of last year’s figures, as GPs trade their strongest assets and face continued pressure from their LPs to transact. The anticipated third interest cut at the Federal Reserve’s final meeting of the year in December will also supplement the end-of-year buying activity.

“M&A is a confidence game,” Tim FitzSimons, a partner in law firm King & Spalding’s corporate practice, told me. “As buyers have more confidence and capital gets cheaper, buyers will come back and that allows sellers to put assets on the market.”

FitzSimons and other transaction lawyers expect these factors to converge in Q4 and early 2025.

Still, it’s important to note that, in certain industries, the results of today’s election will likely either stanch or catalyze future M&A activity.

For example, a Harris administration could uphold FTC commissioner Lina Khan’s aggressive stance toward PE investments in healthcare providers, which would have a continued mitigating effect on PE’s roll-up strategy.

Under a Trump presidency, industry players are anticipating a shift from Democratic-led federal support for clean energy technologies to a return to more “traditional” sources of energy, like oil.

In general though, the buying activity we expect to see in the post-election period is a welcome sign of the long-awaited market pickup and a potential wave of exits to come, industry players said.