Is M&A turning around?

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Pushkin

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 and Pushkin.

My name is Aiden Ryder.

I'm filling in for Rob Armstrong and Katie Martin.

And today I'm joined by Sujit Indap, the FT's Wall Street editor and the person with the lowest handicap on the golf course of anybody in the newsroom.

Great to be here, Aiden.

I've got a tea time in 20 minutes.

Well, let's get into it.

Could you just walk listeners through?

What were Wall Street people excited about coming to this administration?

Sure.

So if we go back, if we rewind to the days right after the November election and Trump's decisive victory, we saw like some of the key deal-making stocks, particularly the boutique investment banks, a sector I follow, just shoot up.

And 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 dealmaking.

So how has that prediction played out so far?

Not so great in the first half of the year and the first year in office.

Dealmaking has been pretty lethargic for a variety of reasons.

not the least of which is the erratic posture of the Trump administration.

Are you saying uncertainty is bad for business?

Aaron Powell, 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.

I've heard a lot about the U.S.

Steel deal and that golden share.

What happened there, and then how did Trump put himself in the middle?

Sure.

So this is a saga that's been going on for a couple of years.

U.S.

Steel, obviously the national champion.

U.S.

Steelmaker, 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.

It's an important state.

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

Yes.

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, behold, that deal eventually gets done a couple of months ago at the same price that was the original terms.

It's fascinating.

It's a huge purchase price.

$55 a share, like double the price of U.S.

steel when the deal was announced.

I think the total value is like $14 billion, a huge blowout price.

But there is a big caveat.

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?

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 interactions around

big events, whether it's like divestitures or layoffs or factories opening and closing.

It's very, very unusual.

Trevor Burrus, Jr.: It seems very antithetical to what we think Republican politics is.

Aaron Powell, Jr.: Yeah, the idea of picking winners and losers and sitting yourself into the private sector, it's basically unprecedented in America.

Got it.

So Wall Street has been turned off by some of the uncertainty and then some of the actual actions of the Trump administration on some of these deals.

Curious, I mean, what does regulatory team look like?

Are they more lax?

Are they more pro-banker?

Like, who did he put in power to actually dictate this, as opposed to who we had before, which was Lena Khan?

Yeah, so it was Alina Khan at the FTC and Jonathan Cantor, who headed the antitrust division of the Justice Department, which are the two main bodies that oversee and approve MA.

So the team that Trump has brought in, both at the FTC and the Department of Justice, they've been a little bit of a wildcard in that they are people who have been skeptical of tech, big tech.

When I say wildcard, I just mean are they more permissive than Lena Kahn and Jonathan Cantor?

Absolutely.

They're just a little bit quirky in how they feel about big concentrated tech.

So they have been a little bit less constructive than Wall Street would have wanted, but they are definitely an improvement.

I think Wall Street feels like this is a set of people they can actually deal with, even if they're not perfect for them.

Yeah, I mean, it seems like

even though a lot of people in the Republican Party and in Wall Street had been criticizing Lena Khan, there's actually a pretty vocal part of the Trump administration that's very pro

regulating big tech and not allowing these consultants.

Yeah, starting with J.D.

Vance,

who himself had been at least moderately intrigued by Lena Khan's theories of corporate corporate power.

That's right.

Yeah, so the first six months of this year have been slow on the MA front.

What's the outlook now?

And as you're saying, what are those deals we should start to expect?

Aaron Powell, there's definitely been a vibe shift in the last two weeks or a month.

And Wall Street's now very excited about the back half of the year.

And the reason is some of these wild cards are getting resolved.

One, the big, beautiful bill has passed, and that enshrines a bunch of tax cuts.

But more than anything, it's done.

And there is some understanding of what the rules of the road as far as fiscal policy are going to be for the next several years.

So that is a relief.

Trevor Burrus: Yeah, it gets rid of that uncertainty we named before.

Yeah.

And then we are now more than three months past Liberation Day and

a bunch of these bilateral trade agreements, tariff agreements are starting to get done.

There's the Japan one.

And we just got Japan yesterday.

Yeah, I don't think Wall Street and corporate America loves tariffs at all, but the terms seem to be more favorable than than what they were maybe at the outset or believed to be at the outset.

And two, it's just done.

So planning certainty is like the most important thing for these people, even if they don't like the actual underlying terms.

They know what they are and they can go about with strategic planning.

So those things, plus the big tailwinds still exist, which are there's just a ton of debt and equity capital out there.

And so there's financing for deals.

Is it relatively expensive?

Yes, but it's out there.

It's not prohibitively expensive.

And then two, and I I think this is a really important point.

I think about this a lot.

Like if we think about companies, they have at all times like strategic imperatives.

They have how they want to grow, where they want to be in five years.

There's these important technological changes, whether it's clean energy or AI that they want to invest in.

And those never go away.

And so there's always an appetite to

make deals happen that help them reach those goals.

It's just a question of whether the external environment will allow allow them to do those deals.

So, that pent-up energy to pursue like strategic goals and plans, those exist.

They've never stopped existing.

And you just need windows to get those done.

And that window seems to be here now.

Yeah, so less uncertainty now that you have some tariff deals starting to go through and the big budget bill being passed.

And then, you know, that pent-up energy is now meeting its moment.

And as you said before, regulators that are okay with some of the things that are coming down the pipeline.

So are there any deals that are like, as you said, pushing the envelope that we should be aware of?

Yeah, we've been reporting on this, and I think there's news on this today.

There's a big railroad merger.

And when I say big, I mean the combined company is going to be worth, if it happens, $250 billion.

The two companies are Union Pacific, a very historic grand railroad, and then it's looking to possibly combine with Norfolk Southern.

This sounds very gilded age to me.

It is very gilded age.

I mean, where's Cornelius Vanderbilt and Jay Gould when you need them?

So that is is a really interesting transaction because there are basically what are called like six class one railroads, which are the big railroads in America or in North America.

There's some Canadian ones, two Canadian ones, two.

And it was thought to be that you could not create consolidation between those.

There's something called the Surface Transportation Board, which is the regulator of railroads.

So they have their own special regulator.

Yeah, their own special regulator.

They have a relatively strict guideline on what conditions will allow for consolidation.

The condition, as I recall, is something like it has to meaningfully enhance competition, which that's usually the opposite goal of M ⁇ A.

But anyway, there are reasons why we should have a transcontinental railroad.

The biggest one is there's this idea like Chicago is a big bottleneck.

If you have cargo going cross-country, it has to change lines.

I see.

This is where two railroads are.

Yeah, they meet.

Chicago is kind of like where they all meet.

And so Union Pacific, the CEO of that company, has been saying, you know, that interchange complexity is expensive.

We're competing against truckers who don't face this.

The market looks different than the regulators thought.

And for that reason, it might be time to create a Transcontinental Railroad.

Wow.

Like it's 1875.

Make 1875 great again.

Make it the 19th century one more time.

That's really interesting.

So this is a deal that probably would not have gone through in the past couple of administrations.

But given this pent-up energy over some genuine concerns they have about their competition and what they actually want to get out of a deal, plus the moment now where we have less uncertainty and a potentially more pliant Trump administration is pushing forward this deal.

Aaron Powell Yeah, it's the kind of like really aggressive deal that you do when you have a ton of confidence you can get it done with regulators and two investors will embrace it.

They want growth.

They're not in a defensive crouch.

And yeah, it's just one of those things you see when people are feeling good and people are starting to feel good.

We have a story in the FT this morning that Goldman Sachs is going to cancel a plan for a second round of layoffs this year.

And that's because they've got deals to do.

Yeah, those lucky bankers.

And they need bankers.

They need bodies to do them.

And that's a pretty bullish sign.

Aaron Trevor Brewer.

Yeah, absolutely.

If you were planning to get rid of a part of your workforce and then no longer going to get rid of this workforce, not only is that a huge boost for morale, but it means that you're probably going to have deals getting done.

So are there any other deals on the horizon that feel like they're going to get through in the next six months?

Aaron Powell, yeah.

I mean, the most intriguing situation, MA political nexus, nexus, is this Paramount deal.

So recall Paramount's the big Hollywood conglomerate.

It's the CBS network.

It's a bunch of cable stations.

It's obviously the movie studio Paramount.

They are set to be acquired by Redbird Capital and Skydance.

Skydance is a small movie studio

by David Ellison, right?

Yes, who's mostly famous for who his dad is, which is Larry Ellison.

And much of Larry Ellison's money, I think, is backing this deal.

And so this deal was signed up.

It's super complicated.

The company is public.

It's going to stay public.

It has a large controlling shareholder, which is the Redstone family.

Sharia Redstone is the matriarch of this company and the family.

And for this deal, which has been signed, it was signed last year, for it to get done, it has to be approved by, among others, the FCC, the Federal Communications Commission.

And that is something that's part of the Trump administration.

And Trump has a problem with elements of Paramount, which are ongoing, most notably CBS and its television news magazine, 60 Minutes, which he had sued them over a segment.

They had an interview they had done with Kamala Harris that said there was this

shady editing they had done.

How did CBS respond to that accusation?

Well, this led to ultimately the negotiations.

The actual lawsuit, most experts said was completely frivolous and ridiculous.

But they settled, they did settle for like $16 million, although Trump was saying the other day it's more than that.

But anyway, that lawsuit has been settled.

Even though it was unlikely that Trump and his team would have been successful in the lawsuit.

And not only that,

the company and the family are getting skewered not only broadly by the public for seemingly caving when they're in the news business and holding powerful people to account, but also their own employees, Stephen Colbert, Jon Stewart, South Park.

Colbert, of course, has seen his show canceled.

Yes.

Company says it's for economic reasons, not his politics.

But he very notably went on air just a few days before and lambasted this deal and lambasted what CBS was doing with the Trump administration.

That's right.

And, you know,

this is a big M ⁇ A deal.

The Trump administration, for better or worse, seems to be in the middle of it.

The company management has responded in the way they have.

They've upset much of their talent.

The whole situation is pretty unprecedented.

It will be one of the key artifacts of the second Trump time in office.

Aaron Powell, absolutely, especially if it shows that this is the direction news media will have to go in to appease the president.

Yeah.

And if you've got business, you're a media conglomerate in front of the Trump administration, how do you cover him and how do you do your job?

It's a tricky situation for all.

Well, today I'm very grateful that the FT is a British company.

Owned by a Japanese.

So let's take a step back.

We've talked about a couple of deals.

We've talked about slow M ⁇ A leading to now some more optimism.

Where are we right now?

Is this the pivot point or just the start of more disappointment?

I think we're back to where we were right after the election.

The idea that there is going to be this release of animal spirits and there's going to be really, really healthy M ⁇ A and IPO volumes, maybe not gangbusters, but really, really good.

And so all these bankers who have been nervous either about their jobs or their bonuses suddenly are getting called back to work and are going to be pitching like crazy.

And a bunch of these deals that are being pitched are actually going to be announced because, again, companies have strategic imperatives, the world is changing, companies have to keep up, and now is the time to do it.

But of course, overhanging all that is what the Trump administration will do on each and every one of these deals.

Yeah, he can't get in the middle of every deal.

You just don't know which deals will catch his interest.

Awesome.

Well, on that very optimistic note, we'll be back with long and short.

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What is Long and Short?

Oh, so Long and Short is a part of the show where we go long, something we like, and short, something we don't like.

Doesn't actually have to be a stock.

It can be absolutely anything.

I've gone long, sweaters, and stonefruit.

I'm going to go long the thing I was doing this weekend, which was watching the British Open Golf Tournament, the Open Championship in Northern Ireland.

Scotty Scheffler is the most dominant golfer since Tiger Woods.

Perhaps a surprise, but it's amazing to watch as a golfer.

I'm going to go long Scotty Schuffler.

Long Scotty Scheffler, the new Tiger Woods.

It seems like it, yes.

Awesome.

Well, I am short Japan.

Not that I'm against Japan.

It seems like a lovely nation.

But I think that people are a little overexcited about the deal they just got with the Trump administration.

While it's great that they now have clarity about where tariffs are and they're lower than they otherwise would have been, Japan is facing a ton of macroeconomic headwinds, including rising inflation, rising rice prices in particular, and, you know, a bunch of questions about labor and the future of demand.

So while it's definitely a good thing for the Japanese economy that they got something of a deal, it doesn't save them from some bigger questions they have to face.

Sujit, thanks so much for joining me.

And listeners, we'll be back in your feed next week.

OnHedge is produced by Jake Harper and edited by Briant Erstad.

Our executive producer producer is Jacob Goldstein.

We had additional help from Topher Foreheads.

Cheryl Brumley is the FT's Global Head of Audio.

Special thanks to Laura Clark, Alistair Mackie, Bretta Cohn, and Natalie Sadler.

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I'm Aiden Ryder.

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