To delay or not to delay

With the race tightening since Kamala Harris became the presumptive Democrat nominee against the Republicans’ Donald Trump, unpredictability around the election result is the main reason for a softening, says Curtin.

In previous election years, many dealmakers either rushed to do deals before an anticipated switch of administration or to delay them. But that kind of talk has dwindled this year, notes Ted Smith, co-founder and president of Union Square Advisors. “I’ve heard over the last six months a lot less talk in this election year about either, ‘I need to get my deal done before the election’ or ‘I don’t want to do my deal until after the election’.”

This time around, Smith expects the usual summer slowdown followed by steadily increasing activity into year-end. That should set up 2025 to be “a really active M&A year” with election uncertainty behind it and better financing conditions in place.

Higher interest from lower rates

A highly anticipated interest-rate cut in September is already adding some fuel to the M&A fire.

Because the prospect of lower interest rates could drive up technology valuations again, many are seeing it as a window to transact in the fall, says one tech banker. “People are getting ready.”

If so, it could buck a dealmaking trend that typically sees US tech M&A volumes fall significantly in the third and fourth quarters of an election year. Over the last 20 years that has almost always been the case, except for 2004’s final quarter and the last two quarters of 2020, according to Mergermarket data (see chart below).

The current Federal Funds rate of 5.25% to 5.50% may be high relative to recent history, but they were much higher for much of the 1980s.

“The cost of capital is not prohibitive,” argues Curtin. What crushed M&A in 2023 was a big delta in valuation, with sellers slow to reset price expectations lower.

“Sellers’ expectations have moderated a bit” since then, says Curtin. “All the while buyers’ ability to tolerate higher capital costs has developed further. That’s why we have more momentum.”

Change of guard

Big Tech firms have faced heightened regulatory scrutiny over the last three and a half years under the hawkish oversight of Lina Khan, Federal Trade Commission chair, and Jonathan Kanter, head of the Department of Justice’s antitrust division.

With Khan’s term ending on 25 September, cautious optimism exists for a less pugnacious approach at the FTC, whoever wins the White House.

Many in Silicon Valley are backing Trump, including Elon Musk and prominent venture capitalists Marc Andreessen and Ben Horowitz. Harris’s Bay Area roots also have won her support from a new group called VCs for Kamala, plus she defended Big Tech against antitrust meddling during her 2010 run for California attorney general.

Whatever the outcome in November, “there is reason for the C-suite to hope that the lanes will be wider from a regulatory perspective even if, in the near term, consummating certain types of transactions will remain complex,” says Curtin.