Is M&A turning around?

SPEAKER_1 (0:06)

Pushkin.

Aiden Reiter (0:09)

Back in November, M&A bankers were popping champagne bottles, excited that the Republican trifecta in the White House and Congress would finally allow them to get the lucrative deals they've been waiting for for the entire Biden administration. So far in the first six months of the Trump administration, that has not been totally the case. Deal making has been slower than people had hoped. Today on the show, is M&A turning a corner?

This is Unhedged, the Finance and Markets Podcast from the Financial Times in Pushkin. My name is Aiden Reiter. I'm filling in for Rob Armstrong and Katie Martin. And today, I'm joined by Sujeet Indap, the FT's Wall Street Editor, and the person with the lowest handicap on the golf course of anybody in the newsroom.

Sujeet Indap (0:49)

Great to be here, Aiden. I've got a tea time in 20 minutes.

Aiden Reiter (0:51)

Well, let's get into it. Could you just walk listeners through, what were Wall Street people excited about coming to this administration?

Sujeet Indap (0:59)

Sure, so if we go back, if we rewind to the days right after the November election and Trump's decisive victory, we saw some of the key deal making stocks, particularly the boutique investment banks sector I follow, just shoot up. The thought was this really divisive, uncertain election was over, and not only was it over, Donald Trump had won and he was going to finally unleash animal spirits into the deals market. He would have much more lax regulators, Lena Kahn and Jonathan Cantor, the hawks from the Biden antitrust regime were going to no longer be on the scene, and this was going to be 2025 would be a golden age of deal making.

Aiden Reiter (1:44)

So how has that prediction played out so far?

Sujeet Indap (1:46)

Not so great in the first half of the year and the first year in office. Deal making has been pretty lethargic for a variety of reasons, not the least of which is the erratic posture of the Trump administration.

Aiden Reiter (1:59)

Are you saying uncertainty is bad for business?

Sujeet Indap (2:01)

For people who want to spend a lot of money on a big deal, it's the worst. So obviously, you know, we had all this back and forth on tariffs, and what would tariffs be, and Liberation Day, and for multinationals, they couldn't plan their own businesses, let alone figure out how much a multi-billion dollar target would be worth. Then, there's the Trump posture to deals himself. He has this habit in certain deals of inserting himself, and that's super complicated, and no director or board wants to get involved in the politics of Trump intervening in deals.

Aiden Reiter (2:37)

I've heard a lot about the US. Steel deal and that golden chair. What happened there, and how did Trump put himself in the middle?

Sujeet Indap (2:42)

Sure. So this is a saga that's been going on for a couple of years. US. Steel, obviously the national champion, US. Steelmaker, a very iconic company in American industrial history. It's much smaller now and less relevant, but still a big employer, particularly in Pennsylvania, it's unionized.

Aiden Reiter (2:57)

An important state.

Sujeet Indap (2:58)

Yeah, and had signed up this deal during the Biden administration to be acquired by the Japanese company Nippon Steel.

Aiden Reiter (3:06)

Yes.

Sujeet Indap (3:07)

And that was controversial. Biden, at the end of his term, essentially had blocked that deal from closing and it seemed dead. It was nominally on national security grounds, but obviously there was a lot of politics around the steel workers who weren't excited about being owned by a Japanese company. Trump comes in and it seems like it's dead, but in fact, nothing's dead with Trump. It's just a negotiation. And lo and behold, that deal eventually gets done a couple of months ago at the same price that was the original terms. Fascinates, a huge purchase price, $55 a share, double the price of US Steel when the deal was announced. I think the total value is $14 billion, a huge blowout price, but there is a big caveat to all that.

Aiden Reiter (3:49)

Yeah, so that would seem great for Wall Street, right? You have this big deal that was on the freeze going through. What did Trump actually do?

Sujeet Indap (3:55)

Trump slash the Trump administration is literally going to be in the boardroom. They got this concept, which is unusual in America. It's called a golden share. And this golden share, it has no economic value per se, but it allows the government board power and the ability to influence, if not direct, certain corporate or actions around big events, whether it's like divestitures or layoffs or factories opening and closing. It's very, very unusual.