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2017-04-03 08:41:03
Trump Plans Have Deal Makers Dreaming Big ($100-Billion-Cash-Takeover Big)

NEW ORLEANS — It wasn’t just cocktails on Bourbon Street or lucky breaks at the blackjack tables that contributed to the buoyant mood of the deal makers who gathered here last week. President Trump — and his support for lower taxes and lighter regulations — also had something to do with it.

At a gathering of the nation’s top mergers and acquisitions lawyers and bankers, the consensus was that under the Trump presidency, deal making should boom.

Lower taxes and less regulation, the thinking goes, should contribute to strong stock prices. And when the markets are up, companies are more likely to strike big deals. Finally, the pro-business Trump administration, most deal makers believe, is likely to take a forgiving view when it comes to antitrust matters.

Taken together, it was enough to lift the spirits of the lawyers, bankers and other advisers who attended Tulane University’s mergers conference last week.

Officially known as the Corporate Law Institute, the event is the year’s pre-eminent gathering of mergers advisers, a Davos for the deal maker set. For decades, top bankers and lawyers from Goldman Sachs; Cravath, Swaine & Moore; and other firms have come to the conference, in good times and in bad.

Lawyers who attend earn legal credits (several lawyers said they eagerly awaited a panel discussion on the arcane matter known as shareholder appraisal rights, a topic that makes nonlawyers’ eyes roll). But the real purpose of the event is to network, whether over butter-laden gulf fish at Galatoire’s or sherried turtle soup at Commander’s Palace or at the high-roller poker tables at Harrah’s.

This year’s gathering had more than 600 attendees, setting a record. And the general agreement throughout the crowd attending presentations at the stately Roosevelt Hotel was that the prospects for business were as good as ever. The sentiment was best captured when a senior banker from JPMorgan Chase made the bold claim that, under current market conditions, a company could strike a $100 billion takeover, paid entirely in cash.

Many deal makers had hoped this year would bring more business after a relatively slow 2016. A survey of 120 advisers by the Brunswick Group, a financial public relations firm, found that 44 percent of respondents believed that more mergers would be struck this year than last.

Mergers data for the first three months of the year appeared to at least partly support that. Some 10,229 transactions, worth $771.3 billion, were announced in the first quarter, according to Thomson Reuters. The dollar value was up 11 percent from the same time a year ago, although the number of deals was down about 11 percent.

Yet doubts were already emerging about whether Mr. Trump will really usher in a boom time for mergers, with the failure of the Republican health care overhaul and the president’s unpredictability threatening to dampen spirits.

The tone for much of the conference was set as Kurt Simon, global chairman for mergers and acquisitions at JPMorgan, made his bold prediction that an enterprising corporate giant today could assemble an all-cash takeover bid of $100 billion.

It was an audacious claim — the record for an all-cash offer is Bayer’s $66 billion bid for Monsanto last year — but it illustrated how favorable the markets are for deal making.

Mr. Simon argued that the right company could borrow enough debt at low interest rates to cover the cash. Investors have largely supported corporate takeovers, pushing up the stocks of purchasers. And the Trump administration, which recently named a health care lobbyist as its choice for the Justice Department’s top merger reviewer, seems unlikely to block many deals.

Some attendees quietly joked that JPMorgan was simply angling for big lending fees. But none disputed the data underlying Mr. Simon’s claim. Interest rates remain low despite two raises by the Federal Reserve. Stock markets have been largely calm, devoid of whipsawing that would give buyers or sellers pause.

“The U.S. economy is in really good shape,” Mr. Simon said.

For years, many of the panelists at Tulane argued vigorously that activist hedge funds trying to shake up companies were short-term investors and did not have the best interests of other shareholders at heart.

Now, even the staunchest critics of these activist shareholders concede that the practice is here to stay.

This conference was perhaps the first one in which an activist sat on stage with the chief executive of a company his firm had targeted. And each man sang the other’s praises.

Gerald L. Hassell, the chief executive of Bank of New York Mellon, spoke on a panel with Edward Garden, the chief investment officer of Trian Partners, an activist hedge fund that had targeted Bank of New York Mellon. The men discussed how they had cooperated in improving the bank’s financial performance, recounting dinners spent discussing strategy and joint efforts to provide financial benchmarks.

“I just want great outcomes,” Mr. Hassell said when asked who deserved praise for the bank’s turnaround. “It’s not an issue of who gets credit.”

And during another panel on activism, the entire group — advisers both to activists and to the companies those investors target — treated the practice as a permanent fixture on the corporate landscape.

Even Joele Frank, a financial publicist who has long advocated waging war on activists, has mellowed out on the topic.

“The biggest change I’ve seen in my practice is there is positive dialogue between the activist and the company for a settlement,” she told the group.

For lawyers in particular, one major draw of the conference is the chance to mingle with judges from Delaware, the corporate home for the vast majority of American companies.

And in particular, that means hearing from the most quotable of them all: Leo E. Strine Jr., the chief justice of Delaware’s Supreme Court.

Mr. Strine is widely regarded as one of the sharpest minds on the Delaware bench, and almost certainly its sharpest wit.

At the Roosevelt, he displayed the offbeat humor that laces his judicial opinions. He described one legally dubious situation as having a smell that was “not Bourbon Street when you’re having fun, but Bourbon Street the next morning.”

Not all was sunshine at the Tulane conference, whether with the mercurial New Orleans weather or with the outlook on transactions.

Panelists pointed to the rise of economic nationalism as a potential dampener on mergers. Both the Brunswick survey and Mr. Simon, of JPMorgan, cited a likely drop in offers for American companies by Chinese and Russian bidders.

Then there was the prospect that the Republicans’ failure to pass a replacement for Obama-era health care regulations made a sweeping tax law overhaul less likely. Some deal makers feared that the issues on which they most want to see reform — corporate tax rates and the taxation of sales made abroad and then brought back to the United States — could end up felled by political gridlock.

“Post-heath care, we have to consider a number of scenarios, one of which is that nothing happens,” said Eileen T. Nugent of the law firm Skadden, Arps, Slate, Meagher & Flom.

And finally, there is Mr. Trump himself, and his brand of economic populism.

Merger proposals that would lead to big job cuts would be unlikely to go anywhere, George R. Bason Jr. of the law firm Davis Polk & Wardwell said, calling such layoffs “a tragedy for a lot of people.”