With the 2024 U.S. presidential elections figuring prominently in the news cycle, many M&A buyers and sellers are considering potential impacts to their plans. A Harris Williams analysis shows that if history is any guide, such concerns are likely unwarranted.

Here, we discuss the implications of our analysis for the U.S. M&A market.

It's Macro That Matters 

To be sure, news coverage of the U.S. presidential elections will feature plenty of commentary on the potential disruptive impacts of one outcome or the other. While these distractions are a certainty, our analysis shows limited sustained impacts to U.S. M&A from the presidential election cycle.

As shown below, Harris Williams analyzed U.S. M&A volumes between 1998 and 2023 to uncover trends related to presidential election-year activity. “Overall, our analysis shows that M&A activity during an election year has been more closely tied to macroeconomic cycles than election cycles, whether during a period of expansion, recovery, or downturn,” notes Bob Baltimore, Harris Williams co-chief executive officer.

Figure 1: M&A Announcements Linked to Economy

Harris Williams Co-CEO John Neuner notes continued signs of health and stability in the U.S. economy, and by extension, more confidence and activity among M&A buyers and sellers. “The public markets are performing well, interest rates appear to have stabilized, and private equity groups are eager to put money to work in high-quality businesses while returning capital to their investors by exiting mature investments,” he says. “At the same time, lenders are showing more flexibility and eagerness to fund M&A, and potential sellers have shifted their mindset from ‘if’ to ‘when.’”

Figure 2: Signs Point to Strengthened M&A Market

While these signs are encouraging and point toward continued recovery in the M&A market, our analysis did show that there have been temporary slowdowns in U.S. M&A announcements during Q3 of a presidential election year (Figure 3). This trend is then reversed for the six-month period following the election, and full-year U.S. M&A transaction volumes have been substantially similar in recent election years versus non-election years. In other words, any disruption will be short-lived.

Figure 3: Temporary Effect of Presidential Elections

Overall, Neuner suggests that buyers and sellers anticipate some potential transaction timing impacts in the fourth quarter of 2024, and that they keep a close eye on how legislative and leadership changes could impact specific sectors and businesses. However, they should not view the election as a major disruption to their M&A strategies: “We’ll all be watching the elections this year, but in the long term it’s more important to stay focused on macroeconomic conditions and industry and company performance.”

In particular, sellers should emphasize core financial and operational metrics that show the quality of the business, says Frank Mountcastle, head of M&A: “We’re seeing premium outcomes for businesses with tangible growth levers and large, growing, fragmented markets. Recurring revenue and organic growth driven by underlying demand and market share gains are also important. So is a clean earnings base and the ability to demonstrate specific and sustainable drivers of margin growth.”

For buyers, Baltimore says showing early commitment is key to prevailing: “When buyers identify a ‘must-have’ asset, they should deploy third-party providers quickly, lean on trusted banker relationships for management introductions, and show a clear path to closing, focusing on getting to the ‘yes.’” Neuner adds that it’s critical for buyers to over-communicate along the way and leverage their relevant experience to bring a unique perspective to the transaction and demonstrate credibility: “There is intense interest in the cream of the crop. Buyers should be ready to run hard.”

Conclusion

M&A market participants will be inundated with frequent news on presidential elections this year. However, our analysis suggests that any impact on M&A markets from the election cycle will be short-lived, and that their ongoing improvement is a much more important factor, as well as sector- and company-specific trendlines.

“The best outcomes over the rest of the year will involve buyers and sellers focused on sustainable long-term growth and strong business fundamentals,” concludes Mountcastle. “We believe the remainder of 2024 will be active for M&A across the majority of industries in which we specialize, and that the presidential election is unlikely to disrupt the strategies of well-positioned buyers or sellers.”

To learn more, please contact our Industry Group senior professionals.