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Wall Street expects Trump presidency will unlock deal-making

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Attendees cheer as a broadcast of former US President and Republican presidential candidate Donald Trum speaking at his Florida election party is shown on a screen at the Nevada GOP election watch party in Las Vegas, Nevada on November 6, 2024. 

Ronda Churchill | Afp | Getty Images

Wall Street dealmakers and corporate leaders expect the flood gates to open on merger and acquisition activity after President-elect Donald Trump takes office in January.

And he’ll likely have congressional help. Trump defeated Democratic candidate Vice President Kamala Harris, and Republicans claimed a majority of the Senate in elections this week. That red wave is expected to spell loosening regulations on deal-making, with plenty of pent-up demand.

“We know kind of where the world is headed in a Trump environment because we’ve seen it before,” said Jeffrey Solomon, president of TD Cowen, on CNBC’s “Money Movers” Wednesday. “I think the regulatory environment will be much more conducive to economic growth. There will be lighter and targeted regulation.”

Solomon added that the scaled-back regulation will be focused on certain areas “of particular interest to the Trump administration,” rather than a broad based reassessment of the entire landscape.

In recent years, there has been greater scrutiny of pending deals by the Biden administration’s Department of Justice and Federal Trade Commission, headed by Chair Lina Khan. Some have pointed to that dynamic as a chilling factor on deal flow. High interest rates and soaring company valuations have contributed, too.

Khan said in September that “when you see greater scrutiny of mergers, you can see greater deterrence of illegal mergers.” Her hard line has drawn harsh criticism, but now, there’s optimism around a forthcoming FTC with a lighter hand.

“Assuming interest rates drop and you see corporate tax rates go down, the ingredients are there for a really active M&A market,” said one top dealmaker, who talked to CNBC on the condition of anonymity to speak candidly.

On Wednesday, markets rallied on the Republican presidential win, with the Dow Jones Industrial Average soaring 1,500 points to a new record high.

Sector specific

Some sectors, including financial and pharmaceutical industries in particular, are likely to get a lift under a second Trump regime, experts said.

“We could see domestic manufacturing benefit from increased tariffs as well as a growth in technology, which slowed down from a tighter antitrust environment,” said Howard Gutman, private equity strategy and coverage lead for MorganFranklin Consulting. “Additionally, we expect the aerospace and defense industry to grow as it has historically done during past Republican administrations paired with the broader geopolitical environment.”

Other industries, such as tech, may still face an uphill battle in getting deals done.

One M&A advisor, who also spoke to CNBC anonymously, noted that Trump’s disdain for Big Tech companies — historically active deal-makers — might keep them on the sidelines. On Wednesday, tech leaders took to social media to congratulate Trump.

Apparent GOP opposition to the CHIPS Act means that semiconductor consolidation might be challenging, the advisor noted, while cautioning it is still too early to know what a Trump presidency would mean. CNBC previously reported that Qualcomm recently approached Intel about a potential takeover.

“I think the simplest way to put it is more deals, less regulation with the administration having its thumb on the scale, perhaps with a willingness to pick winners and losers,” said Jonathan Miller, chief executive of Integrated Media, which specializes in digital media investments.

Regional banks, many of which recognize the need for scale, will also likely look to consolidate, said one former industry executive. That advisor noted that smaller banks had been getting gobbled up for “some time,” but that the pace and size of those acquisitions would likely ramp up under a Trump presidency.

Pharmaceutical executives are also optimistic that lighter antitrust enforcement could clear the way for deal-making, said one health-care-focused M&A advisor, who added that antitrust enforcement could have “hardly gotten worse” under either administration but now believes things will improve “meaningfully.”

Khan has taken on scores of biopharma mergers over the last four years, arguing that monopolies will stifle the development of new drugs in certain disease areas and hurt consumer choice. Biotech company Illumina last year said it would divest diagnostic test maker Grail after heated battles with the FTC and European antitrust regulators.

Also last year, the FTC blocked Sanofi’s proposed acquisition of a drug in development for Pompe disease, a genetic condition, from Maze Therapeutics. Sanofi ultimately terminated that deal.

“Whether or not Lina Khan is bounced day one is a key consideration, but even if fewer changes at the FTC take place, there is no doubt this administration — at least on paper — will be far more amicable when it comes to business combinations,” Jared Holz, Mizuho health-care equity strategist, said in an email on Wednesday.

One top dealmaker expected an M&A uptick broadly, but agreed that the financial sector and pharmaceuticals were particularly poised for a resurgence. That deal-maker also noted that with the Senate flipping, more outspoken antitrust voices like Sen. Elizabeth Warren, D-Mass., could find it more difficult to push for DOJ or FTC investigations.

Eyes on retail, media

David Zaslav at the Allen & Company Sun Valley Conference on July 9, 2024 in Sun Valley, Idaho.

David Grogan | CNBC

A Trump presidency could usher in a number of retail deals that have been hamstrung by the FTC. Kroger’s bid to take over grocery chain Albertsons could have a better chance of getting approved under Trump, as could Tapestry’s proposed acquisition of Capri.

The merger between Kroger and Albertsons is currently under review by a federal judge, while Tapestry is working to appeal a federal order that granted the FTC’s motion for a preliminary injunction against the tie-up.

“The hostile approach of the FTC to mergers and acquisitions will almost certainly be reset and replaced with a worldview that is more favorable to corporate dealmaking,” said GlobalData managing director Neil Saunders. “This does not necessarily mean that big deals like Kroger-Albertsons will be waved through, but it does mean others like Tapestry-Capri will receive a far warmer reception than they have under the Biden administration.”

Meanwhile, ongoing turmoil in the media industry has led many to consider consolidation as the next step for the sector.

Warner Bros. Discovery CEO David Zaslav on Thursday highlighted opportunities that could come up if regulations were to loosen, doubling down on comments he made earlier this year at Allen & Co.’s annual Sun Valley conference.

“We have an upcoming new administration. … It’s too early to tell, but it may offer a pace of change and opportunity for consolidation that may be quite different, that would provide a real positive and accelerated impact on this industry that’s needed,” Zaslav said on an earnings call.

Broadcast station group owner Sinclair on Wednesday echoed a similar sentiment.

“We’re very excited about the upcoming regulatory environment,” CEO Chris Ripley said during an earnings call. “It does feel like a cloud over the industry is lifting here.”

Still, the track record between the previous Trump administration and the Biden administration for media industry deals is split.

Trump’s DOJ allowed Disney to buy Fox’s assets, but then sued to block AT&T’s deal for Time Warner.

Under the Biden administration, Amazon’s $8.5 billion deal for MGM and the merger of Warner Bros. and Discovery Communications were both waved through, but a federal judge blocked the $2.2 billion sale of Simon & Schuster to Penguin Random House.

Skydance Media and Paramount Global agreed to merge earlier this year and expect to receive regulatory approval in 2025.

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What ETFs are the best for those in or near retirement?

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Americans are retiring at a record-setting pace amid the aging of the baby boomer generation, and exchange-traded funds (ETFs) have become a popular way for retirees to invest in ways that align with their risk tolerance and diversification needs.

A recent report by the Alliance for Lifetime Income found that about 4.1 million Americans are projected to turn 65 on an annual basis from 2024 through 2025. That has pushed the number of Americans turning 65 each day from roughly 10,000 in the past decade to more than 11,200 this year.

ETFs can offer investors access to a variety of investment themes of interest to retirees, from equity ETFs optimized for dividend yields to bond ETFs yielding interest on government and corporate debt, as well as those modeled on broader indices like the S&P 500 or that have international exposure. Some can also include built-in hedging strategies to guard against downside risk.

IS A RETIREMENT SAVINGS CRISIS LOOMING?

“Investments are personal, and the ‘best’ ETFs for someone in or near retirement can vary widely, depending on their situation. Those in or near retirement should evaluate their situation in terms of their overall allocation, the time horizon for drawing down or growing their assets, and what level of risk they’re comfortable with,” said Lawrence Sprung, CFP and founder of Mitlin Financial.

Couple celebrates retirement

Retirees can use ETFs to deliver income in retirement by targeting dividend or interest-paying ETFs, or use them to diversify their portfolios. (iStock / iStock)

“Investors that have a higher risk level and longer time horizon will be included to invest in more growth-oriented ETFs. On the other hand, investors who require income today from these assets with a lower risk tolerance will have their portfolios allocated more toward income-oriented investments,” Sprung added. “The ETFs that may be best for one investor may not be the best for another.”

IRS INCREASES 401(K), OTHER RETIREMENT PLAN CONTRIBUTION LIMITS FOR 2025

401k pension stock market

ETFs can be broadly diversified or may be narrowly focused on a certain part of the market. (Angela Weiss / AFP for Getty Images / Getty Images)

Some ETFs offer retirees and future retirees some downside risk protection, said Faron Daugs, the CEO of Harrison Wallace Financial Group.

“Often, these are referred to as buffered ETFs. They are generally tied to a stock market index and have various downside percentage protection in the event of a downturn in the market,” he said. “This type of ETF allows you to participate in potential growth opportunities but offers individuals a little bit of a parachute in the event of a downturn.”

“Another option to consider would be an ETF that invests in dividend-producing stocks. Typically, having a portfolio can generate you a return via a dividend, regardless of the stock performance, can serve as an attractive way to gain some growth potential and offer potential for return in some form – even if the price of the stock declines,” Daugs added.

investment portfolio

ETFs can help investors diversify their portfolios by targeting specific types of assets more efficiently. (iStock / iStock)

ETF: WHAT THEY ARE AND HOW TO MAKE MONEY WITH THEM

If a retiree needs income during their golden years, an ETF that pays dividends or interest can be a wise investment, said Ted Jenkin, co-founder and consultant at oXYGen Financial.

“SPDR Portfolio S&P 500 High Dividend ETF (SPYD), Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) and iShares Select Dividend ETF (DVY) are just a few to look at,” he said.

Ticker Security Last Change Change %
SPYD SPDR® PORTFOLIO S&P 500® HIGH DIVIDEND ETF – USD DIS 46.40 +0.53 +1.16%
VIG VANGUARD SPECIALIZED FUNDS DIVIDEND APPRECIATION ETF 201.00 +2.26 +1.14%
DIVY TIDAL ETF TRUST SOUND EQUITY DIV INC ETF 26.88 +0.11 +0.40%

Jared Levy, chief markets strategist at Peak American Financial, said that investors should be “extremely precise the closer they get to retirement” because they typically are shifting from “prioritizing growth to prioritizing protection.” Levy added that it’s “critical to have an all-weather portfolio that is not only balanced for your risk tolerance, but one that doesn’t become correlated if things start to fall apart.” 

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He said that one of his firm’s all-weather portfolios features the Protected S&P 500 ETF (BUFR) along with a mix of corporate and Treasury bond ETFs; bitcoin, gold and precious metal ETFs, a small-cap ETF based on the Russell 2000 and other investment instruments.

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Thousands of Americans see their savings vanish

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Oscar Wong | Moment | Getty Images

For 15 years, former Texas schoolteacher Kayla Morris put every dollar she could save into a home for her growing family.

When she and her husband sold the house last year, they stowed away the proceeds, $282,153.87, in what they thought of as a safe place — an account at the savings startup Yotta held at a real bank.

Morris, like thousands of other customers, was snared in the collapse of a behind-the-scenes fintech firm called Synapse and has been locked out of her account for six months as of November. She held out hope that her money was still secure. Then she learned how much Evolve Bank & Trust, the lender where her funds were supposed to be held, was prepared to return to her.

“We were informed last Monday that Evolve was only going to pay us $500 out of that $280,000,” Morris said during a court hearing last week, her voice wavering. “It’s just devastating.”

The crisis started in May when a dispute between Synapse and Evolve Bank over customer balances boiled over and the fintech middleman turned off access to a key system used to process transactions. Synapse helped fintech startups like Yotta and Juno, which are not banks, offer checking accounts and debit cards by hooking them up with small lenders like Evolve.

In the immediate aftermath of Synapse’s bankruptcy, which happened after an exodus of its fintech clients, a court-appointed trustee found that up to $96 million of customer funds was missing.

The mystery of where those funds are hasn’t been solved, despite six months of court-mediated efforts between the four banks involved. That’s mostly because the estate of Andreessen Horowitz-backed Synapse doesn’t have the money to hire an outside firm to perform a full reconciliation of its ledgers, according to Jelena McWilliams, the bankruptcy trustee.

But what is now clear is that regular Americans like Morris are bearing the brunt of that shortfall and will receive little or nothing from savings accounts that they believed were backed by the full faith and credit of the U.S. government.

The losses demonstrate the risks of a system where customers didn’t have direct relationships with banks, instead relying on startups to keep track of their funds, who offloaded that responsibility onto middlemen like Synapse.

Zach Jacobs, 37, of Tampa, Florida helped form a group called Fight For Our Funds after losing more than $94,000 that he had in a fintech savings account called Yotta.

Courtesy: Zach Jacobs

‘Reverse bank robbery’

There are thousands of others like Morris. While there’s not yet a full tally of those left shortchanged, at Yotta alone, 13,725 customers say they are being offered a combined $11.8 million despite putting in $64.9 million in deposits, according to figures shared by Yotta co-founder and CEO Adam Moelis.

CNBC spoke to a dozen customers caught in this predicament, people who are owed sums ranging from $7,000 to well over $200,000.

From FedEx drivers to small business owners, teachers to dentists, they described the loss of years of savings after turning to fintechs like Yotta for the higher interest rates on offer, for innovative features or because they were turned away from traditional banks.

One Yotta customer, Zach Jacobs, logged onto Evolve’s website on Nov. 4 to find he was getting back just $128.68 of the $94,468.92 he had deposited — and he decided to act.

Zach Jacobs decided to act after logging onto Evolve’s website on Nov. 4 to find he was getting just $128.68 of his $94,468.92 in deposits.

Courtesy: Zach Jacobs

The 37-year-old Tampa, Florida-based business owner began organizing with other victims online, creating a board of volunteers for a group called Fight For Our Funds. It’s his hope that they gain attention from press and politicians.

So far, 3,454 people have signed on, saying they’ve lost a combined $30.4 million.

“When you tell people about this, it’s like, ‘There’s no way this can happen,'” Jacobs said. “A bank just robbed us. This is the first reverse bank robbery in the history of America.”

Andrew Meloan, a chemical engineer from Chicago, said he had hoped to see the return of $200,000 he’d deposited with Yotta. Early this month, he received an unexpected PayPal remittance from Evolve for $5.

“When I signed up, they gave me an Evolve routing and account number,” Meloan said. “Now they’re saying they only have $5 of my money, and the rest is someplace else. I feel like I’ve been conned.”

A bank just robbed us. This is the first reverse bank robbery in the history of America.”

Zach Jacobs

Yotta customer

Cracks in the system

Unlike meme stocks or crypto bets, in which the user naturally assumes some risk, most customers viewed funds held in Federal Deposit Insurance Corp.-backed accounts as the safest place to keep their money. People relied on accounts powered by Synapse for everyday expenses like buying groceries and paying rent, or for saving for major life events like home purchases or surgeries.

Several people CNBC interviewed said signing up seemed like a good bet since Yotta and other fintechs advertised that deposits were FDIC-insured through Evolve.

“We were assured that this was just a savings account,” Morris said during last week’s hearing. “We are not risk-takers, we’re not gamblers.”

Abandoned by U.S. regulators who have so far declined to act, they are left with few clear options to recoup their money.

In June, the FDIC made it clear that its insurance fund doesn’t cover the failure of nonbanks like Synapse, and that in the event of such a firm’s failure, recovering funds through the courts wasn’t guaranteed.

Three months later, the FDIC proposed a new rule that would force banks to keep detailed records for customers of fintech apps, improving the chances that they qualify for coverage in a future calamity and cutting the risk that funds would go missing.

McWilliams, herself a former FDIC chair during the first Trump presidency, told the California judge handling the Synapse bankruptcy case last week she was “disheartened” that every financial regulator has decided not to help.

The FDIC and Federal Reserve declined to comment, and McWilliams didn’t respond to emails.

Jelena McWilliams, chairman of the Federal Deposit Insurance Corporation, testifies during a House Financial Services Committee hearing in Rayburn Building titled “Oversight of Prudential Regulators: Ensuring the Safety, Soundness and Accountability of Megabanks and Other Depository Institutions,” on Thursday, May 16, 2019.

Tom Williams | CQ-Roll Call, Inc. | Getty Images

Winners and losers

Things hadn’t always seemed so dire. Early in the proceedings, McWilliams suggested to Judge Martin Barash that customers be given a partial payment, essentially spreading the pain among everyone.

But that would’ve required more coordination between Evolve and the other lenders that held customer funds than what ultimately happened.

As the hearings dragged on, the three other institutions, AMG National Trust, Lineage Bank and American Bank, began disbursing the funds they had, while Evolve took months to perform what it initially said would be a comprehensive reconciliation.

Around the time Evolve completed its efforts in October, it said it could only figure out the user funds it held, not the location of the missing funds. That’s at least partly because of “very large bulk transfers” of funds without identification of who owned the money, a lawyer for Evolve testified last week.

As a result, the bankruptcy process has minted relative winners and losers.

Some end users recently received all their funds back, while others, like Indiana FedEx driver Natasha Craft, received none, she told CNBC.

Natasha Craft, a 25-year-old FedEx driver from Mishawaka, Indiana. She has been locked out of her Yotta banking account since May 11.

Courtesy: Natasha Craft

As of Nov. 12, the four banks released $193 million to customers, or more than 85% of what they held earlier in the year.

The Nov. 13 hearing has provided the only public venue for victims to register their distress; dozens of victims queued up in the hopes they could testify about receiving a tiny fraction of what they’re owed. The event went longer than three hours.

“You can’t imagine the panic when it said I was getting 81 cents,” said Andreatte Caliguire, who said she is owed $22,000. “I have no money, I have no path forward, I have nothing.”

‘Nothing optimistic’

Evolve says that “the vast majority” of funds held for Yotta and other customers were moved to other banks in October and November of 2023 on directions from Synapse, according to an Evolve spokesman. 

“Where those end user funds went after that is an important question, but unfortunately not one Evolve can answer with the data it currently has,” the spokesman said.

Yotta says that Evolve has given fintech firms and the trustee no information about how it determined payouts, “despite acknowledging in court that a shortfall existed at Evolve prior to October 2023,” according to a spokesman for the startup, who noted that several executives have recently left the bank. “We hope regulators take notice and act.”

In statements released ahead of this month’s hearing, Evolve said that other banks refused to participate in its efforts to create a master ledger, while AMG and Lineage said that Evolve’s implication that they had the missing funds was “irresponsible and disingenuous.”

As the banks and other parties hurl accusations at each other and lawsuits pile up, including pending class-action efforts, the window for cooperation is rapidly closing, Barash said last week.

“As time goes by, my impression is that unless the banks that are involved can sort this out voluntarily, it may not get sorted out,” Barash said. “There’s nothing optimistic about what I’m telling you.”

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