White House Race Said to Aid Deal Activity

Their usual financial sponsors sidelined by the credit crunch, merger bankers are getting a lift from an unexpected direction - the presidential election contest.

The looming leadership transition in Washington is sparking a flurry of corporate M&A deals, Business Week reports. The burst of activity will keep bankers busy for awhile, and may cushion 2008 advisory fees and bonuses thought to be at risk from the economic slowdown. If the economy revives in this year's second half as many people expect, then M&A bankers might dodge the bullet altogether.

Among recent deal announcements, Microsoft offered to acquire Yahoo! for $44 billion, Reed Elsevier agreed to acquire ChoicePoint for $4 billion, Northwest Airlines and Delta Airlines are in late-stage merger talks, and Continental Airlines formally disclosed it has held merger talks with one or more airlines it didn't name.

Displacement of private-equity sponsored leveraged buyouts by strategic corporate acquisitions became a prominent feature of the M&A landscape during the second half of 2007. Now, corporate activity is getting a further boost from the presidential election, according to BusinessWeek. "Some deals are being rushed to get them approved (by antitrust regulators) before President George W. Bush leaves office on Jan. 20, 2009," the magazine says. "All else being equal, most assume a Democrat in the White House will be more suspicious of proposed mergers."

Although antitrust regulation is hardly a hot-button campaign issue, one White House hopeful did criticize the Bush administration as too soft on mergers, in a response to a questionnaire last year from the American Antitrust Institute. That candidate was the likely Democratic nominee, Sen. Barack Obama. He reportedly said he would "reinvigorate" antitrust enforcement, and made specific mention of the health care sector.

The other remaining Democrat in the race, Sen. Hillary Clinton, said earlier this month that governmental reviews of airline mergers should include "a hard look at the potential effects on workers," according to BusinessWeek. A Democratic administration might be also be tougher on mergers between media companies, the article suggests.

Aside from any differences between the political parties, BusinessWeek says companies also fear that deals for which approval is sought in 2009 could get stuck in "post-election limbo" amid a transition to a new administration - even a Republican one. It also mentions well-known macroeconomic forces promoting corporate mergers, including lower share prices, the withdrawal of PE bidders, and heightened foreign interest sparked by the weak U.S. dollar. Buyers from India and China may be "especially active" this year, Stefano Aversa, co-president of turnaround consultant AlixPartners, told Business Week.

Industries mentioned as rife with M&A activity include energy, technology, transportation and logistics, commodities, banking, hotels, publishing, aluminum and steel.