Biden’s antitrust crackdown on tech M&As may linger into Trump’s reign

Analysis When Donald Trump takes office for his second term on January 20, many expect sweeping changes across the board. But among tech players, when it comes to mergers and acquisitions, those hoping for looser regulations might be disappointed. 

Under the Biden administration, the perception of heightened regulatory scrutiny and antitrust enforcement has fueled dissatisfaction among the tech elite. Even some who supported Vice President Kamala Harris's failed presidential bid wanted Chair Lina Khan out of the FTC.

"There's been a lot of reporting done that the current FTC is, for lack of a better term, more aggressive in finding objections to proposed transactions that historically would not have faced the same degree of scrutiny," Andrew Luh, partner and chair of M&A practice at Silicon Valley law firm Gunderson Dettmer told The Register in an interview. 

"There are a lot of high profile examples in the news about deals that are being challenged," Luh added, referring to high-profile deals like Microsoft's acquisition of Activision-Blizzard and other top-tier cases that Khan's FTC has fought. "If you're just using those types of [cases], the fact that some of those companies appear to be less favored under the current enforcement regime would have some chilling effect."

Despite those high-profile antitrust cases, Luh said the pace hasn't slowed down that much. 

"We, as a firm, will work on about 150 a year and we're not a huge firm by any means," Luh said. "So the aggregate tech M&A deal stats are still massive, even if you silo off [the most scrutinized deals]." 

There's data to support that when it comes to large-scale deals. S&P Global put out a report on the M&A outlook under the second Trump administration shortly after the election that suggested, contrary to the perception of the Biden administration as a trust-busting, anti-acquisition administration, the total number of tech, media, and telecom (TMT) acquisitions valued over $500 million has actually been higher under Biden than Trump's first term. 

As of the end of October 2024, there have been 235 $500M+ TMT M&As under Biden, and just 223 during Trump's four years in office. Even with the added scrutiny, the median number of days it took to complete those M&As only rose by a single day under Biden - 77 days for the average deal compared to 76 under Trump.

Beyond that, PricewaterhouseCooper (PwC) deals partner Lori Bistis told us, any years following the COVID-19 pandemic are going to look slow compared to the immediate aftermath of 2020. 

Both 2021 and 2022 saw a huge rise in M&A activity in the tech sector and outside of it, Bistis and Luh noted. 

"You went from a level of dealmaking that was unprecedented to more normal numbers," Bistis said. "If you look at it based on the last three or four years, dealmaking in 2023 was down in tech." 

Bistis pointed to new merger guidelines issued by the Department of Justice and FTC in late 2023, as well as upcoming changes to premerger notification rules, set to take effect on February 10, as factors contributing to a slowdown in deal activity this year.

"There's more effort that has to go into what you produce for the government and the regulatory agencies to get a deal done," Bistis said. "Overall from a regulatory standpoint, there's a lot more review going on." 

Economic factors are at play, too

Bistis and Luh both mentioned that a slowdown in post-COVID M&A activity isn't solely on the FTC and DoJ - there's economics at work, too. 

"You'll always see a slowdown in dealmaking during an election year just because that equates to uncertainty," Bistis noted. High interest rates and geopolitical tensions are playing a role, she said. 

Those factors have led companies to explore alternatives to traditional M&A, which still involve significant dealmaking but often face fewer regulatory hurdles, Bistis noted. Divestitures and joint ventures are both hot right now, thanks in large part to economic challenges in the tech sector. 

"Historically for big tech, there hasn't been much of a focus on divestitures, but I think we've seen that a bit more," Bistis said. 

If you think about the last couple of years, it's been about a lot of restructuring in tech

This is evident in the numerous layoffs, closures, and spinoffs we've seen in recent years. 

"If you think about the last couple of years, it's been about a lot of restructuring in tech," Bistis said - and that means "efficiency," she noted. "Part of [restructuring] is usually looking at some non-core assets that maybe you can extract some value out of them sooner if you sell." 

Khan's legacy: Tougher M&As, Trump or not

Bistis said she expects the trend of divestitures and joint ventures to continue as Biden-era regulations come onto the books that make M&As a bigger hassle, and undoing those rules won't be as easy as issuing an executive order.

As mentioned above, the new changes to the Hart-Scott-Rodino (HSR) premerger notification rules and forms are going to make it even more cumbersome to get an acquisition past the authorities.

According to FTC chair Khan, the new HSR forms include requirements for companies to report a lot of additional information. Submissions will need to include info on entities and individuals involved in deals that will have the ability to influence post-acquisition decision making, supply relationships that may undermine competition or rival's access to key products or services, information about products and services still under development that are not yet generating revenues, and details of certain prior acquisitions closed by both firms in the past five years to help regulators assess whether the transaction is part of an anticompetitive roll-up scheme.

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The HSR updates and 2023 merger guidelines were both passed by the Commission on unanimous votes of 5-0 and 3-0, respectively. While the 2023 guidelines were voted on before Republican commissioners joined the Biden-era FTC, the new HSR rules were okayed by Democrats and Republicans alike - including Trump's pick to head the FTC, Andrew Ferguson. 

While noting the new HSR rule "is not perfect, nor is it the rule I would have written if the decision were mine alone" in his concurring statement, Ferguson nonetheless voted to ratify it. 

"The additional information sought in the Final Rule is 'necessary and appropriate,'" Ferguson opined. "Its benefits are many, and, by comparison, the added burdens are reasonable."

Additionally, an FTC spokesperson pointed out to The Register that the new HSR rules haven't resulted in a single lawsuit yet. This could suggest that companies have largely acquiesced to the new requirements.

The Trump transition team didn't respond to questions for this story.

Cautious optimism among transition chaos

As we've noted in several stories covering the potential policies of the incoming Trump administration, there's a lot of uncertainty swirling around Trump's plans for his second term that's led to the tech industry hitting the brakes on big changes. Things are largely the same in the M&A world right now. 

As compared to the regulatory trends we've seen over the last several years, I think it's a cautious optimism

Both Luh and Bistis said their clients have been operating under a "wait and see" mindset, with Luh in particular saying that most businesses are just trying to wrap up year-end matters rather than thinking about 2025 acquisition plans. 

Bistis, on the other hand, said that the people she's been speaking with are excited that the M&A process might become a little simpler: Even if the paperwork isn't going away, regulators might take a more hands-off approach. 

"I think as compared to the regulatory trends we've seen over the last several years, I think it's a cautious optimism," Bistis said. "The benchmark over the last four years was pretty tough." 

That said, anyone in the tech space who's preparing to get the deal motor running come Trump's inauguration would do well to get their house in order, Bistis told us, pointing to a number of suggestions PwC publishes for TMT firms.

"Focus on collecting the data now that you need to respond to said regulatory increases," Bistis suggested. "You never want to be the hold up."

"There's a lot to be done - especially with these new HSR requirements coming out," the PwC advisor said - and those rules are unlikely to vanish before Trump takes office. "The more [you] can get ahead of that, if you're preparing to do an M&A, the better." ®