US investment banks are back under Trump 2.0, but for how long?

Donald Trump’s election to a second term as US president has led to a bullish mood among the investment banking community, with anticipated financial deregulation and tax cuts forecast to prompt a sharp uptick in deals.  

Gary Goldstein, a founder and group chief executive of Whitney Partners, told The Banker that he is “excited and enthusiastic” about investment banking’s prospects under Trump, predicting that a lighter regulatory touch will prompt lenders to free up capital to ramp up activity in profitable areas including proprietary trading and merchant banking.

“If banks get back into some of the more risk-oriented businesses, they’ll be more competitive with the alternative asset managers in terms of how they pay people,” he says. 

Trump’s upcoming return to the White House has sparked an urgency among clients to get deals done, according to Fernando Rivas, co-CEO of corporate and investment banking at Wells Fargo.

“The [Biden] administration, by being so against deals, may actually have created a catalyst for there to be a lot more of them,” he said, speaking at the Financial Times and The Banker’s Global Banking Summit earlier in December.

Anton Sahazizian, managing director and global head of mergers and acquisitions at Moelis & Company, predicted that many deals will happen in the first or second quarter of 2025, with businesses coming to market then likely to attract significant interest from buyers.

“It’s almost as if we have seen a light switch turn on since the US elections as you’ve seen an acceleration of completions of deals that were in the backlog,” he said during a recent webinar hosted by S&P Global Market Intelligence.  

“At the same time, we’re seeing pitch activity increasing, and those pitches produce more additions to the backlog.” 

Jay Hoffmann, managing director and co-head of North America M&A at JPMorgan, predicted that deal counts will be at least 15 per cent higher in 2025 than in 2024. 

“We will see more consolidation in energy, banking and general financial institutions as the declining interest rate path will open up opportunities to do deals,” he said, speaking at the same webinar.   

Sahazizian also pointed out the valuation gap between the US and Europe is the widest he has ever seen, with far greater interest in assets in the former than in the latter.

“You would expect US market actors to be hunting in Europe but it is the opposite, as the US is a target-rich environment for everyone,” he said.

Deal window

Yet the optimum window for transactions is unlikely to last throughout the full length of Trump’s presidency. The main investment banking themes for 2025 are predicted to be “sponsor exits and CEO confidence leading to larger transactions in the corporate sphere”, according to Richard Casavechia, head of Americas for global banking at UBS. 

But factors such as potential US tariffs, geopolitical conflicts, and the attitude courts may take towards large transactions may dampen dealmaking from the end of 2025 onwards, he predicted. 

“Markets see tariffs as a concern, and when and whether tariffs will be implemented is an open question,” said UBS’s Casavechia, speaking at a recent media roundtable organised by the bank. 

“Trump campaigned on ending inflation and will be careful on tariffs that are inflationary.” 

Whether large M&A deals above $10bn will be seen more favourably under a Trump versus Biden administration remains to be seen.

While antitrust laws in the US have remained unchanged, the interpretation of the laws by courts has shifted significantly during the Biden administration, according to Casavechia. 

“With parties more willing to litigate, courts are making decisions on the antitrust front at the moment, which could be set to change under the new administration,” he said, noting that corporate clients remain nervous about whether deals in the “larger range will be challenged”.

One of the most well known Biden officials on the antitrust front is outgoing Federal Trade Commissioner Lina Khan, who has slowed M&A activity on antitrust grounds in recent years. The collapse of the $25bn supermarket merger between Albertsons and Kroger in December was seen as a victory for Khan, who will be replaced by Andrew Ferguson, former chief counsel for top Senate Republican Mitch McConnell, in the new year.   

S&P Global Markets Intelligence data notes that the M&A landscape in the US is becoming healthier, with the number of deals registered during the third quarter of the year reaching its highest level since the first quarter of 2023.

Word of caution

But JPMorgan’s Hoffmann warned that large deals under the new administration can still expect to face scrutiny, especially when it comes to healthcare and big tech.

“There is a well-founded expectation that this new administration will be more supportive of dealmaking but we should not expect it to be as accommodating as a traditional Republican government,” he said.

Another dimension of that is how geopolitics could shape the perception of cross-border deals in certain sectors. 

Goldstein says Trump is unlikely to get in the way of major US domestic deals and a lot will depend on the advice he gets from people he trusts. 

“There will be no consistency in the approach Trump takes but what we do know is there will be more scrutiny of cross-border deals because he does not want the appearance that he is allowing assets out of the US to be managed by others,” he says. 

And while he is optimistic about the future of US investment banking, Goldstein also cautioned against excessive exuberance.

“This is an environment where CEOs are going to think twice about what they say on the public record because of the potential backlash they could receive,” he says.

“And we already see that playing out, and Trump’s conditioned the market and CEOs to hold back on taking political stances that might not be helpful to him, and the banking industry is no exception.”