What a Trump-led FTC will mean for retail M&A
The Biden-era FTC has been known as particularly aggressive against large deals involving consumer companies. That could soon come to an end as M&A and antitrust experts expect dealmaking to pick up under the new administration.
In October, the FTC blocked the planned $8.5 million merger between luxury brand owners Tapestry and Capri. Last Thursday, Tapestry announced the termination of the deal. In 2023, the FTC sued Amazon, alleging the e-commerce giant abuses its position in the marketplace to inflate prices, overcharge sellers and stifle competition. The FTC and lawyers in Washington state and Colorado have been in court over the proposed merger between Kroger and Albertsons since August, which could either move forward or fall through before the end of this year.
But that stands to change in a few short months.
“I definitely think the floodgates are going to open compared to what they are right now, which, they’re basically closed,” said Brian Yarbrough, an analyst covering consumer companies for Edward Jones. “Any deal that gets talked about, just about, there’s some pushback or some type of blocking.”
Since the election, investors have been enthusiastic about the prospect of less regulation and more opportunity for M&A. Still, Trump’s FTC may still target big-tech companies as the president-elect has made aggressive statements in the past about them and Trump’s Justice Department and FTC in his previous administration launched major lawsuits against Google and Meta.
M&A activity could rise in the next administration, but that doesn’t guarantee a massive boom in dealmaking. Here’s what analysts and antitrust experts expect over the next few years.
How antitrust enforcement has differed under Trump & Biden
Despite the perception that Biden’s FTC was more active than Trump’s, there were actually slightly more DOJ and FTC challenges to mergers during the first three years of Trump’s term than during Biden’s: 118 from 2017 and 2019 and 108 from 2021 and 2023, per Quartz.
Biden’s FTC has been known as particularly aggressive against large corporations, attempting to block deals such as the Kroger-Albertsons merger, the $69 billion purchase of video game publisher Activision Blizzard by Microsoft — a fight that was not successful in stopping the deal — and Tempur Sealy’s proposed $4 billion purchase of Mattress Firm.
Chris Sagers, an antitrust professor at Cleveland State University said the last Trump administration’s antitrust enforcement was business-as-usual for a Republican administration, other than that there was more of a sense that antitrust officials were pursuing cases less about antitrust values and more about the president’s political agenda. The Trump-era Department of Justice’s challenge of the merger of Time Warner and AT&T in 2018 was scrutinized by former DOJ lawyers as being potentially politically motivated. It involved the parent company of CNN, of which the president was an outspoken critic.
“That was sort of an ambitious, aggressive merger challenge of a kind that we wouldn’t expect even Democratic administrations to bring, but there was always a suspicion that the motive for it really was that the president happened to dislike CNN,” Sagers said.
Because Trump hasn’t expressed frustrations with many retail companies, Sagers doesn’t expect many retail deals other than those to the degree of Kroger-Albertsons to be challenged. “What I would predict is we will have pretty routine enforcement in retail.”
The FTC isn’t all to blame for slower dealmaking
Regardless of how tight of a hold the FTC has on dealmaking, consumer M&A activity has declined due to other factors not related to who is in charge in the U.S. The volume of deals involving consumer companies globally declined 22% year over year in the first half of 2024 due to macroeconomic factors such as inflation and the pandemic, according to PwC research.
Andrew Dunst, partner and managing director of Sage Group — an M&A advisory firm focused on consumer brands — said there has been improvement in lending for consumer deals. Still, compared to a few years ago, there is still more hesitancy around how the economy will look over the next 12 to 18 months.
“People are still pricing in and considering the possibility of some economic downturn,” Dunst said. “While I don’t think the chance of a recession at all is high, people are still considering that that is a possibility.”
Some categories are struggling more than others, according to Dunst. He said more “recession-resistant” categories are still strong: beauty, personal care, food and beverage, pet supplements and baby and juvenile products. For example, in June, The Estée Lauder Cos. bought Deciem, the parent company of The Ordinary and Niod, for $1.7 billion. General Mills bought pet supplement brand Fera Pets in November 2023 for an undisclosed price.
The FTC typically doesn’t have as much of an impact on smaller, middle-market deals. But more relaxed antitrust enforcement could trickle down and encourage M&A activity across the board, per Dunst. Dunst said the tighter FTC may have cooled private-equity interest even outside of the multibillion dollar deals, because private-equity funds often underwrite strategic exits as one of their options. Even under Trump’s FTC, the FTC’s 2020 lawsuit to block CPG conglomerate Edgewell’s acquisition of razor brand Harry’s put larger DTC deals into question. If it’s harder to eventually sell a company due to FTC issues, they may be less willing to invest and it could reduce the price they’re willing to pay.
“I do believe that reigning in the FTC will obviously have a positive impact on M&A and the consumer landscape,” Dunst said.