October 16, 2020

Beyond TikTok: Dealing with the Politicization of M&A

President Trump’s intervention to compel the sale of TikTok highlights the extent to which M&A has become politicized.  But this CFO Dive article points out that the politicization of M&A didn’t start with that transaction, and is by no means limited to it. Here’s an excerpt with some thoughts from Abernathy MacGregor’s Patrick Tucker – one of the panelists on our “Activist Profiles & Playbooks” annual webcast:

Mergers and acquisition attacks from national figures, including Trump and Sen. Elizabeth Warren (D-MA), have filtered down the political food chain, said Patrick Tucker, head of M&A and activism for PR and investor relations firm Abernathy MacGregor.

Before TikTok hit the news, lawmakers and regulators were getting involved in M&A deals far more frequently. In the first quarter of the year, before the impact of the pandemic was fully felt, deals were down 50% in the U.S., Dealogic data shows. It is unlikely much of that drop would be attributable to political interference, but there’s no doubt lawmakers want to see deals get more scrutiny, Tucker said in a blog post.

“Politicians do not need to make policy to have an impact,” Tucker said. “Noise” alone can pose major challenges. [An increase in anti-merger] proposals are merely the latest indication that challenging M&A is increasingly seen as good politics.”

Dealmakers should also expect more pushback from state attorneys general and other regulators. Patrick also offers some tips for CFOs dealing with the current environment.  These include:

Be patient. CFOs like certainty and predictability, neither of which politics offers. It is important to stay patient to see a process through and withstand the urge to react to every bombardment.

Communicate investments in stakeholders. M&A is traditionally about satisfying investors. The intersection of politics and M&A is forcing a more focused conversation on how the company serves other stakeholders such as communities and employees.

No layoff commitments. To avoid local fallout from proposed deals, CFOs at participating companies and their funders may want to consider including a no-layoffs commitment through a certain date; pay and benefits protection; and new community initiatives.

Companies also need to be aware of the reputational risk involved when politics and an M&A deal collide, and assess their risk tolerance in this area. The article also points out the need to keep in mind the potential that personal political orientation among management may distort judgment on value creation. 

John Jenkins