Joe Biden has finally been confirmed as US President, following several fraught days of ballot-counting. But what does his victory mean for PE?
Many in the industry will be glad to see the back of the volatility that characterised policy-making in the Trump administration.
While the platform Biden ran on suggests higher taxation and tighter regulation overall (trends that are typically negative for deal activity), the priority afforded to tackling COVID-19 and climate change could open up opportunities for assets in the healthcare and built environment sectors. We outline these themes in more depth below.
Tax rises: Low-hanging fruit?
Biden talked a lot about raising corporation tax during the campaign. If the Democrats control both houses of Congress come January, expect to see an increase prioritised as part of the new administration’s legislative agenda. This move would reduce the profitability of larger assets and PE firms trading as corporations – but it is smart politics for a President who crafted his personal brand around standing up for “ordinary folk”.
The incoming President also sees an easy political win from raising Capital Gains Tax (CGT) on all income above $1 million, as well as a timely revenue raiser that helps offset losses from COVID-19.
Tighter regulation and scrutiny of M&As
Biden is no firebrand, but he and his party have stressed the need to better regulate M&As – especially those in sectors, such as technology, where issues of national security arise. The Democrats already proposed legislation during Trump’s presidency that sought to increase the oversight powers of the Federal Trade Commission (FTC) and broaden its regulatory remit.
In addition, it is likely that the Biden administration will use the appointment of progressive figures to drive tighter enforcement of antitrust regulations.
Fighting COVID-19
Biden’s acknowledgement that social distancing measures will have to continue into next year will likely sustain demand heightened for companies that can provider remote medical assistance and advice – or adapt their offering accordingly.
Against this, it is worth considering how any tightening of regulation around M&As may affect demand for healthcare assets. With Democrat proposals aimed at encouraging greater pluralism within markets, this could create favourable procurement environment for smaller healthcare firms seeking entry into state- or federal-level supply chains.
Green opportunities
Biden promised to increase taxes on carbon emissions and increase subsidies for clean energy sources. This is likely to augment demand for assets active in the sustainable energy sphere.
by Ioan Phillips, Senior Political Analyst