Wall Street expects Trump presidency will unlock deal-making

Wall Street dealmakers and corporate leaders expect the flood gates to open on merger and acquisition activity after President-elect Donald Trump takes office in January.

And he’ll likely have congressional help. Trump defeated Democratic candidate Vice President Kamala Harris, and Republicans claimed a majority of the Senate in elections this week. That red wave is expected to spell loosening regulations on deal-making, with plenty of pent-up demand.

“We know kind of where the world is headed in a Trump environment because we’ve seen it before,” said Jeffrey Solomon, president of TD Cowen, on CNBC’s “Money Movers” Wednesday. “I think the regulatory environment will be much more conducive to economic growth. There will be lighter and targeted regulation.”

Solomon added that the scaled-back regulation will be focused on certain areas “of particular interest to the Trump administration,” rather than a broad based reassessment of the entire landscape.

In recent years, there has been greater scrutiny of pending deals by the Biden administration’s Department of Justice and Federal Trade Commission, headed by Chair Lina Khan. Some have pointed to that dynamic as a chilling factor on deal flow. High interest rates and soaring company valuations have contributed, too.

Khan said in September that “when you see greater scrutiny of mergers, you can see greater deterrence of illegal mergers.” Her hard line has drawn harsh criticism, but now, there’s optimism around a forthcoming FTC with a lighter hand.

“Assuming interest rates drop and you see corporate tax rates go down, the ingredients are there for a really active M&A market,” said one top dealmaker, who talked to CNBC on the condition of anonymity to speak candidly.

On Wednesday, markets rallied on the Republican presidential win, with the Dow Jones Industrial Average soaring 1,500 points to a new record high.

Some sectors, including financial and pharmaceutical industries in particular, are likely to get a lift under a second Trump regime, experts said.

Pharmaceutical executives are especially optimistic that lighter antitrust enforcement could clear the way for deal-making, said one health-care-focused M&A advisor, who added that antitrust enforcement could have “hardly gotten worse” under either administration but now believes things will improve “meaningfully.”

Khan has taken on scores of biopharma mergers over the last four years, arguing that monopolies will stifle the development of new drugs in certain disease areas and hurt consumer choice. Biotech company Illumina last year said it would divest diagnostic test maker Grail after heated battles with the FTC and European antitrust regulators.

Also last year, the…