If past is prologue, the political clarity that follows November’s midterm elections could help drive an M&A uptick next year.

Uncertainty, as any dealmaker will tell you, suppresses M&A activity. Knowing the election results should give executives and boards greater confidence to transact, even if the White House loses control of Congress, as many expect.

Dealmakers interviewed by Mergermarket expect M&A activity to pick up once the outcome is known.

“Clearing the midterms will give boardrooms and dealmakers a sense of certainty over the political landscape ahead and drive increased confidence to pursue M&A strategies,” said Elizabeth Donley, Global Head of M&A at Hogan Lovells Cadwalader.

“Once the outcome of the midterm elections is known, dealmakers will be better able to price in the changes,” said Christian J. Westra, co-leader of Ropes & Gray’s private equity transactions practice. “Historically, coming out of an election cycle, there has often been a rebound in deal activity, so we are hopeful that will be the case.”

That does not mean a change of control in Congress is irrelevant. A Democratic victory could usher in a more confrontational oversight environment, particularly for private equity, healthcare, defense, and AI-related deals, said dealmakers.

Mergermarket data supports the view that M&A activity is likely to rise post-election. Across the six midterm election cycles since 2002, US M&A volume in the year following the vote averaged roughly 9% higher than during the election year itself.

Activity rebounded in the year after the 2002, 2010, 2014, and 2018 contests. The notable exceptions were 2007, when the global financial crisis began to take hold, and 2023, when the most aggressive interest rate hikes in four decades weighed on dealmaking.

Several of the strongest rebounds began immediately after Election Day. First-quarter M&A volume rose 12% in 2011, 15% in 2015, and 43% in 2019 from the prior quarter. Across all six midterms since 2002, M&A in the first quarter after a midterm election jumped 8% on average from the preceding quarter.

However, activity typically softened in the second half of the year after the midterms, underscoring that political clarity may boost near-term dealmaking, but broader economic and financing conditions ultimately drive the market.

Deals keep moving

That contrasts with a familiar election-year narrative in which companies either rush to complete transactions under a known regulatory regime or delay decisions until the political fog clears.

So far, dealmakers are doing neither.

“For most deals, the election isn’t driving timing or strategy,” said Daryl Lansdale, vice chair, US at Norton Rose Fulbright.

Instead, buyers contemplating lengthy regulatory reviews are focused on whether those transactions can withstand whatever political environment emerges next year. That means negotiating enough flexibility and time in merger agreements to secure approvals.

Many dealmakers are keen to transact for strategic reasons and have become inured to the geopolitical volatility that has marked Donald Trump’s second term as president. That means the midterms are producing more noise than actual roadblocks.

Sarah Jones, global head of corporate at Clifford Chance, said she is not getting the sense dealmakers are waiting for the election. Companies have largely absorbed the political uncertainty that has characterized recent years, particularly when acquisitions are driven by compelling strategic rationales, she said.

Depending on the result, some companies may even accelerate efforts to close transactions this year to avoid the risk of future policy shifts, said Donley.

Gridlock with subpoenas

If Democrats capture the House, new committee chairs would gain control of investigative agendas and subpoena powers.

Westra expects private equity firms and their portfolio companies to face a “very different investigative environment,” particularly in sectors already drawing political attention, including healthcare, housing, defense, and youth sports.

Paradoxically, divided government could intensify scrutiny precisely because political gridlock makes major legislation harder to pass.

A Democratic-controlled House would likely use “whatever levers it can,” Westra said, including hearings, subpoenas, and testimony from private-sector executives.

That could create more political noise around deals without materially changing merger enforcement, said Westra.

The White House will continue to control the Department of Justice and Federal Trade Commission, and both Westra and Donley said they do not expect the election itself to alter how those agencies review transactions in the near term.

Still, Congress can influence the broader environment.

“While Congress doesn’t approve mergers, a change in control still matters,” Lansdale said. “New committee chairs can use hearings and subpoenas to second-guess agency decisions, including settlements, and regulators know that.”

Healthcare, private equity roll-ups, media, and large mergers among competitors are among the transactions most likely to attract attention, he said.

State politics matter

Donley is closely watching defense, energy, healthcare, and AI infrastructure.

Defense, in particular, has benefited from shifting government priorities and an influx of private capital into defense technology. A change in funding priorities could alter valuations and appetite for larger transactions, she said.

Similar dynamics apply to energy and healthcare, where shifts in government policy and regulation play a significant role in shaping companies’ underlying economics.

AI and data infrastructure may be the sectors where politics and dealmaking intersect most directly.

Ajay Agrawal, co-founder of Intrepid Growth Partners, said the midterm elections could reshape AI regulation, moving it away from the lighter-touch, self-regulatory approach of the Trump administration. That could slow AI development, and with it M&A activity, he said.

Likewise, Donley said federal or state election outcomes could affect decisions on data-center development, power generation and grid capacity, all crucial for AI investment and M&A.

State elections may therefore matter almost as much as the congressional contests.

More than 30 state attorneys general are on the ballot this year. Unlike congressional committees, state attorneys general can sue to block a deal directly, even after it has secured federal clearance, Lansdale noted.

As a result, political and regulatory risk is showing up mostly in deal terms rather than deal price, Lansdale said. Sellers are focused on how long buyers must pursue approvals, what divestitures they will accept, and what termination fees they will pay if a transaction is ultimately blocked.

Even so, the bigger risk may be broader dysfunction. Donley noted that a shift in control of Congress could increase the likelihood of policy standoffs, government investigations, and even shutdowns. Such disruptions would, in turn, introduce uncertainty and weaken the appetite to transact.

For now, the key question in M&A may not be who wins in Washington. It may simply be whether the result gives dealmakers enough certainty to keep on moving.