Analysis: Dealmakers see divided U.S. government favoring mergers and acquisitions
Democratic vice-presidential nominee Kamala Harris introduces Democratic 2020 U.S. presidential nominee Joe Biden at an election rally, after news media announced that Biden has won the 2020 U.S. presidential election, in Wilmington, Delaware · Reuters

By Joshua Franklin, Pamela Barbaglia and Krystal Hu

NEW YORK/LONDON (Reuters) - Joe Biden's projected win of the U.S. presidency and the Republican Party potentially retaining control of the U.S. Senate could drive a pickup in mergers and acquisitions (M&A) that took a hit amid the COVID-19 pandemic, dealmakers said.

Bankers and lawyers who advise companies on M&A said the outcome, if confirmed, was the best possible for providing the stable economic and regulatory environment that dealmaking needs. They expect that Biden, the Democratic Party candidate, would be more predictable in governing than Republican President Donald Trump, and that a Republican-controlled U.S. Senate would restrain Biden's most interventionist policies.

"This dynamic can be quite conducive to doing deals, because it provides stability," said Peter Orszag, who served in the White House under President Barack Obama and now heads the financial advisory arm of investment bank Lazard Ltd <LAZ.N>.

"The only caveat is that there is less chance of another big round of stimulus, which would help the macroeconomic outlook, than if Democrats had taken the Senate," Orszag added.

All major U.S. TV networks projected Biden would win the presidency on Saturday, though Trump vowed to continue to challenge the outcome in the courts. Two runoff U.S. Senate races in Georgia, which will decide which party will control the upper chamber of Congress, will take place on Jan. 5, with Republicans favored to retain control based on this week's tally.

Republicans holding a slim majority in the Senate could block large swaths of Biden's legislative and spending agenda, as well as key appointments for his Cabinet and government agencies.

"Corporate leaders and markets like stability. Gridlock, in its own way, can be seen as a stabilizer, as we saw during the Obama administration," said Cary Kochman, co-head of global M&A at Citigroup Inc <C.N>.

While M&A activity jumped in the third quarter as executives rushed to revisit deals put on hold at the height of the coronavirus outbreak, deal volume globally is down 12% year-to-date to $2.84 trillion, according to data provider Refinitiv. Deal volume involving U.S. companies being acquired is down 32% year-to-date to $1.07 trillion.

Dealmakers said certainty over financial and regulatory policy will be crucial in the coming months to keep M&A going, as a new wave of coronavirus infections spreads across the United States and most of the world.

"I would venture to say some M&A has been held up under the Trump administration, because Trump could sometimes be unpredictable with his Twitter account," said Bill Curtin, global head of M&A at Hogan Lovells.