What Do Elections Mean For M&A

As the United States approaches its 60^th presidential election on November 5, 2024, we’ve identified some of the key ways this lead-up to the polls is likely to positively impact M&A activity.

Government Spending Will Amp Up

A presidential election year historically means government spending will increase. Known as the "electoral theory of spending,” [1] it’s driven primarily by currently elected officials wanting to show support for spending programs put forth by candidates and/or parties they support.

There is also evidence it stems from insecurity by elected officials about what the election results will bring, thus being more receptive to spending programs in the here and now.

It is likely U.S. government spending will increase this year and at least one year post-presidential election, as it has in other presidential election years.

This is a positive for M&A transactions, especially those involving companies in the government services space. These include organizations with a focus on cybersecurity, research, intelligence, technology, and engineering.

Easing of Monetary Policies

Historically and globally, fiscal policies have the potential to ease in the build-up to a major election. This is particularly true in nations outside the United States that are less democratic and have weaker central banks. [2]

Other nations that have presidential elections scheduled in 2024 include Senegal, Venezuela, Pakistan, Finland, Russia, and Taiwan.

There is also a major election on June 9 for the European Union as members head to the polls to vote for members of the European Parliament. This will be the first such election of its kind since Brexit - the withdrawal of the United Kingdom from the European Union.

While the easing of fiscal policies in an election year is more commonly seen outside the United States, this phenomenon can still have a beneficial impact on American investors in international M&A deals.

Confluence of Factors

The lead-up to the presidential election in the United States is also likely to correspond with projected rates by the Federal Reserve, further increasing the likelihood of growth in M&A deals.

Even the prospects of these rate cuts are having a positive impact on dealmaking right now. Reuters [3] reported in early March 2024 that global private equity-backed deal volumes are up 22.5% so far this year due to the interest rate outlook, slackening inflation, strong corporate earnings, and a healthy stock market.

More good news from Dealogic [4]: global M&A volumes this year through the first week of March 2024 surged 55% to $601.79 billion, compared to the same period in 2023. Additionally, the number of M&A transactions worth over $10 billion soared threefold.

Bottom Line

Buyers, sellers, and M&A professionals should feel a significant measure of comfort and optimism right now that dealmaking is off to a strong start in 2024. They should also feel confident in continued positive direction as we approach elections in the United States and beyond. Here at Benchmark International, our deal teams look forward to helping you achieve your M&A objectives during this growth-filled time.

[1] James L. Payne, Elections and government spending https://www.jstor.org/stable/30025444

[2] Goldman Sachs, How the world’s record share of elections will ripple through the economy https://www.goldmansachs.com/intelligence/pages/how-the-worlds-record-share-of-elections-ripple.html?chl=em&plt=briefings&cid=0301&plc=body

[3 & 4 ] Reuters, Dealmakers see 'green shoots' in M&A activity in election year after 2023 doldrums https://www.reuters.com/markets/deals/dealmakers-see-green-shoots-ma-activity-election-year-after-2023-doldrums-2024-03-07/#:~:text=Investment%20bankers%20and%20lawyers%20expect,22.5%25%20so%20far%20this%20year