Mark Thierfelder on Economic Uncertainty's Impact on M&A Demand

Economic Uncertainty and M&A

• ⚠️ Economic uncertainty and volatility are making deals very difficult to get done, requiring an intermediate to long-term view for underwriting.
• 💡 While uncertainty is good for trading, it hinders M&A and strategic investments by complicating asset deployment and return on capital calculations.

Post-Election Deal Flow

• 📉 Deal flow tends to slow down in the first quarter after a new president, even a pro-business one, as markets await clarity on policies.
• ⏳ This pattern suggests a wait-and-see approach until the initial 100 days of an administration settle.

Sector-Specific Opportunities

• ⚡ Despite general uncertainty, some economic segments like power utilities, certain energy sectors, and infrastructure businesses are expected to see strong M&A activity.
• 💡 Even with a 50% discount on AI power projections, these sectors are seen as drivers for M&A and equity capital market activity.
• 🏢 An example cited is the potential acquisition of Calpine by Constellation for $19 billion.

Tariffs and Business Decisions

• 📊 Companies can model and underwrite around specific tariffs, but constant change and lack of direction create unmanageable uncertainty.
• 📈 Until tariff-related uncertainty is resolved, it will continue to inhibit M&A demand.

European M&A Landscape

• 🇪🇺 While European stock markets have shown recent strength and lower borrowing costs, it's too early to confirm a resuscitation of the private equity and M&A game.
• 🇺🇸 Long-term trends may refocus capital back to the US, which remains a strong consumer economy with numerous opportunities.
• 📊 More stability is needed in Europe before significant investment dollars are directed there over the US.