What impact will President Joe Biden and Vice President Kamala Harris have on M&A? Mergers & Acquisitions turns to Rusty Wiley, CEO of Datasite, for insight.

Which sectors are likely to see a boost in M&A during the Biden-Harris administration?  

The distribution of a safe and effective Covid-19 vaccine and additional government stimulus are expected to have the greatest impact on M&A in the next 12 months, according to a recent survey of accounting, finance, and corporate development professionals in the U.S.  

The healthcare sector, which remained robust throughout 2020, could see an additional jump with increased government support for research and development. For instance, the Biden-Harris administration will provide more direct funding to the National Institutes of Health (NIH), which will help propagate startups that larger companies may subsequently acquire. In addition, expanded healthcare benefits and increased funding to Medicaid and Medicare will inject growth into point-of-care providers, making them more attractive targets for buyers. 

Another area expected to get a boost from the new administration is renewable energy. Biden has said he will make significant investments in clean and renewable energy, which should spur activity. The U.S. government is also expected to be a big buyer of renewable energy, including electric cars. 

Which sectors are likely to decrease in M&A? 

On the flip side, heavily regulated industries like healthcare and energy are also likely to see stricter regulations under a Biden-Harris administration, which could have a dampening effect on M&A. For example, a Biden-Harris administration may scrutinize proposed healthcare mergers and acquisitions more aggressively and enforce antitrust laws rigorously. Of course, this is also likely to result in more asset sales and spin-offs, leading to more M&A. 

The new administration is also expected to increase its scrutiny of big technology, which could make large scale M&A in the sector less likely. Still, technology was the most active M&A sector in 2020, and should be again in 2021, as the sector continues to benefit from the digitalization of all industries, a shift that had been happening already but which the global pandemic has accelerated. 

What should dealmakers expect on taxes?        

The prospect of tax reform under a new administration, including a tax plan that would raise the corporate income tax rate to 28 percent from 21 percent, helped accelerate deal volume in the latter half of 2020 and is expected to continue to play a role in M&A, though the timing of when any changes may happen isn’t clear. Biden has also voiced support for a hike on capital gains taxes, which could potentially delay or dampen M&A activity. Additionally, the new administration is also expected to use taxes versus retaliatory tariffs as a cross-border business lever, which could impact trade and cross-border mergers and acquisition activity. Companies should reevaluate their corporate tax strategy now to be prepared for any changes.