Following discussions with a number of boutique investment banks, there appears to be a trend that some engagements relating to sell-side deals at such investment banks are being slowed down or temporarily put on hold as the targets await the outcome of proposed tax law and regulatory changes that have been promised by the Trump administration, which include cutting business regulations, reducing the corporate income tax rate and implementing an import tax or tariff.
The overall economic environment is healthy and macroeconomic indicators are pointing in a positive direction (http://www.focus-economics.com/countries/united-states). This positive information bodes well for the overall M&A environment and most market participants believe this year we will see continued growth in M&A activity in the current economic expansion. That being said, it appears that private company owners are being cautious about entering into a possible sale of their respective companies as they believe the regulatory and tax changes will have positive value indications for their businesses and for their own personal finances (i.e., as an outcome of liquidity events).
The outlook for M&A this year still suggests that parties are interested in pursuing M&A activities this year, but that sellers are adopting a wait and see approach for now, hoping that the promised regulatory and tax changes proposed by the Trump administration will have a near-term effect on the outcomes, including, from a regulatory perspective, potential impacts would be priced into the target’s value on a forward-looking basis. This outlook, however is somewhat disconnected from what we are seeing in the public markets, where the anticipated tax changes appear to have been priced into some equity values, as public equities overall have seen a significant run-up post-election, assuming that the Trump administration will have a positive effect on business performance in the future.