Mergers and Acquisitions (M&A) activity can be influenced by various factors but an election year introduces additional dynamics that may impact transactions. In this article we consider the factors that can drive M&A activity during an election year.
Policy Uncertainty
With uncertainty on future government policies, businesses may seek to complete their M&A transactions before the election to avoid potential changes in regulations or tax policies that could affect the deal’s terms. Equally, companies may engage in M&A based on positive expectations about changes in government policies, for example, the possibility of future business-friendly policies or possible tax incentives could encourage some companies to pursue acquisitions.
Economic Outlook
Activity can be influenced by the perceived economic outlook associated with election results, with companies more inclined to pursue acquisitions if they anticipate a stable or favourable economic environment post-election.
Interest Rates and Monetary Policy
The monetary policy stance can impact interest rates. Companies may accelerate M&A plans if they anticipate rising interest rates, as this can affect the cost of financing deals. Conversely, if interest rates are expected to decline, it may spur increased M&A activity.
Market Sentiment
Investor and business sentiment can be influenced by electionrelated news and events. Positive sentiment may encourage companies to pursue M&A opportunities, while uncertainty or negative sentiment could lead to a more cautious approach.
Industry-Specific
Certain industries may be more sensitive to election outcomes. For instance, healthcare businesses will closely monitor potential changes in healthcare policies, while energy companies may be concerned about shifts in environmental regulations. Infrastructure-related industries may see heightened activity if candidates propose significant investments in infrastructure projects.
Global Geopolitical Landscape
2024 will be a record year for elections with 40% of the world’s population due to go to the polls. With elections impacting on geopolitical dynamics, companies with international operations may consider M&A activities based on expectations of how election outcomes will affect trade policies and international relations.
Stakeholder Expectations
Companies may align their M&A strategies with the expectations of key stakeholders, including shareholders and employees. Election-related factors can influence these expectations, prompting companies to adjust their plans.
Of course, the impact of election-related factors on M&A activity will vary based on the specific circumstances, timing and sentiment surrounding an election and the regional context. With global economic factors and market conditions also playing a role in shaping decisions, 2024 is set to be an interesting year for M&A activity.
Ultimately decisions surrounding the timing of selling or buying a business come down to the individual businesses – the owners, their strategy and when the time is right for them.
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