Trump Era Policy Uncertainty Affecting M&A: Davis Polk’s O’Brien

By Ruth David, Bloomberg News

Policy uncertainty in the U.S. under the Trump administration is preventing some companies from embarking on mergers and acquisitions, according to Davis Polk & Wardwell LLP’s Jeffrey O’Brien.

“I don’t think we’ve seen the Trump Trade,” said O’Brien, co-head of the European practice at Davis Polk, in reference to expectations that policies President Donald Trump championed would help the economy. “Part of the reason is we have not yet seen an implementable policy program, whether it be tax reform, whether it be insurance sector reform.”

Geopolitical uncertainty has resulted in companies spending more time asking how to ensure deals get done, O’Brien said in an interview on Bloomberg TV. “Antitrust remains a risk to be reckoned with” even though strong financing markets are helping both sellers and buyers execute transactions, he said.

Deals Davis Polk advised on this year include Reckitt Benckiser Group Plc’s $16.6 billion agreement to purchase Mead Johnson Nutrition Co. and Natura Cosmeticos SA’s deal to buy the Body Shop from L’Oreal SA.

“There are growth opportunities for high-quality brands, and that is in the face of consumer spending that has remained relatively stable and relatively stable economic growth but without wage growth,” O’Brien said.

Deals for European companies have risen nearly 37 percent this year while spending on North American targets fell 19 percent, according to data compiled by Bloomberg. “If you look on a historical basis more than just on a year-on-year basis, 2017 will be a good year for M&A,” he said.

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