Ralph Schlosstein Talks M&A Outlook After Midterms

Schlosstein Sees Two-Year M&A Window After Midterms

Ralph Schlosstein reads the midterm result as a vote for centrism and divided government, which he says has historically produced compromise and good markets. That gives companies a two-year window before the executive branch's regulatory stance could change. The US fiscal path remains unsustainable, and AI is the biggest thing in his business lifetime, though its progress will slow rather than stop.

Takeaways

• Divided government has historically helped markets. Schlosstein calls the midterm result a vote for centrism and checks and balances. He says divided government has historically brought compromise and good markets, and he expects a pretty good economy.
• Dealmaking window runs through next two years. Much of what business faces is decided by the executive branch's regulatory world, which has two years left. Schlosstein says companies weighing big strategic deals can reasonably conclude the regulatory environment will be more receptive over the next two years than after that.
• Left is small minority of Democrats. Schlosstein expects about 250 House Democrats, with 12 or 15 on the left, or five to seven percent of the caucus. He says incoming Speaker Hakeem Jeffries can win a majority without them, giving him more flexibility than Speaker Mike Johnson had.
• US fiscal path is unsustainable. Schlosstein calls the fiscal trajectory totally unsustainable and says it will end badly, though he does not know what will precipitate that or when. He believes the bond market will be the ultimate trigger, but something else will trigger the bond market.
• Global capital will keep flowing to America. Schlosstein says America has the strongest and most liquid capital markets and the greatest creative entrepreneurship in the world. He points to Texas, where Democrats won for the first time since the 1990s and roughly a third of planned data centers will be built.
• AI will slow but not stop. Schlosstein calls AI the biggest thing in his business lifetime and says progress will slow rather than stop. He compares froth to 1999-2001, when Cisco needed 150 percent of the global router market to justify its valuation, and predicts a several-trillion-dollar company within a decade.
• Business regulation sits with executive branch. Schlosstein says much of what business deals with is decided in the regulatory world controlled by the executive branch, which has two years left. He calls the incoming House committee chairman's "lawyer up" message disappointing and says states have de minimis antitrust standing.