The policy landscape for deals in the 2020 election

October 14, 2020

Colin Wittmer
Deals Leader, PwC US

There’s never 100% certainty in M&A and other deals, but in the final months of 2020, it’s clear this year is like no other — including the upcoming US presidential election. No matter what polls say, we won’t officially know which administration will occupy the White House until at least the night of Nov. 3 and quite possibly later. For dealmakers, that lack of predictability — on top of the COVID-19 pandemic and economic recession — creates a more challenging M&A environment, but also one with opportunities.

To gain more insight, PwC recently hosted a virtual client event focused on the election and its implications for M&A and other deals. David Axelrod, a CNN political commentator and former advisor to President Barack Obama, joined a discussion of the current electoral landscape, potential outcomes in November and major policy areas that will be in play in the months ahead – no matter who’s president and which party controls Congress.

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1:50

Deals Exchange: Election 2020

What executives, investors and dealmakers need to know to address tomorrow’s deal dynamics, featuring David Axelrod.

Issues influencing the deals landscape

Listening to David, I noticed a few key issues that could influence the deals landscape in 2021 and beyond:

  • While some analysts have viewed former Vice President Joe Biden as proposing a more progressive policy agenda than previous Democratic presidential primary winners, he’s also a longtime government institutionalist who believes in the power of bipartisanship. In a polarized political environment, Biden’s historical approach might bring more stability and agreement that could increase confidence in the business environment.
  • America’s relationship with China and questions about fair play in business are mutual concerns of Democrats and Republicans, but the tone of their discussions varies. President Trump has portrayed China as an adversary, while Biden sees China more as an economic competitor and likely would try to put pressure on China with the help of US allies. Human rights also could be a Biden focus. Whichever approach wins out, companies and investors could look to scale businesses more regionally instead of globally.
  • Healthcare continues to be a volatile issue that has even more weight during the pandemic. The Supreme Court is expected to consider a challenge to the Affordable Care Act (ACA) immediately after the election. If the law is thrown out, millions of Americans would lose health insurance. That could impact certain workforces in the short term, and — if Biden becomes president — ultimately lead to a push for an ACA replacement. A new law could mean another pivot for companies on healthcare coverage.
  • Tax policy is an area in which the two parties are far apart, and that could result in significant changes in a new administration. Trump has touted the Tax Cuts and Jobs Act, the largest overhaul of the US tax code in three decades, as a major accomplishment. But Biden has been open to major initiatives, such as raising the corporate tax rate, top individual tax rate and top capital-gains tax rate, that would generate revenue for various programs. A substantial shift in companies’ tax obligations could impact their growth strategies.

Deal activity has picked up

The health crisis and recession curbed deal activity earlier this year, but we’ve started to see a recovery in multiple areas. In the October PwC Pulse Survey, more than 60% of executives said their companies likely will pursue an acquisition within the next 12 months. While deals overall have been smaller, megadeals — transactions of at least $5 billion in value — are happening in tech, pharma, retail and energy. Companies also are placing bets in other sectors, whether it’s a multinational food conglomerate acquiring a biotech company or a fitness wear company buying a startup that makes tech-enabled mirrors that allow people to join live fitness classes.

All eyes are understandably on the Nov. 3 election, and the presidential path that voters choose will have a major impact on some aspects of the business environment. Dealmakers who understand the above issues, use tools to help reduce risk – such as earnouts – and prepare for different scenarios will be in a stronger position to pursue transactions that deliver value.

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0:56

ESG, the economy and deals

Political consultant and analyst David Axelrod and PwC's US Deals Leader Colin Wittmer discuss the economy, green energy, and Environmental, Social, and Corporate Governance (ESG).

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