What Keeps You Up At Night? Views From The C-Suite On U.S. Election

By Jeff Sheban, Deborah Balshem and Yiqin Shen

If anything is certain heading into Tuesday’s general election, it is that 2020 has been a year like no other. Widespread uncertainty over so many issues – ranging from the next administration’s response to Covid-19 to the future of healthcare – continues to roil financial markets and divide the nation. 

What’s crystal clear, however, are the stark differences between presidential candidates Donald Trump and Joe Biden on so many issues including trade, taxes and the environment. To borrow a catchphrase from Senate Majority Leader Mitch McConnell, elections do have consequences. What impact will the results have on financial markets and the outlook for M&A? 

In the final runup to Election Day, Mergermarket has been speaking to C-level executives at public, private and family-run companies in a variety of sectors to better understand the issues that are important to them. Among them: 

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  • Taxes: How much could capital gains and corporate rates rise if Democrats gain control of both Congress and the White House, and the impact on M&A
  • Trade and debt: Will government debt and trade tension with China continue to rise if Trump is re-elected, and implications for capital markets
  • Healthcare: Are we headed for another major overhaul, and what it would mean for private insurance
  • Energy: Is carbon-based energy going the way of the dinosaur, and if so, how soon 

After the springtime chill in M&A activity due to Covid-19, both corporate and financial buyers have been slowly catching up on deal activities. But Mergermarket data indicate that strategic buyers are somewhat lagging in deal flow, while sponsors are pushing ahead. In Q3, strategics contributed less than half of total monthly deal count (as shown in chart), down considerably from the year-ago period. Typically, corporate deals account for about two-thirds of total deal activity.

Aside from general Covid-19 restrictions contributing to the slowdown, some corporates may have held back ahead of the election due to uncertainty surrounding antitrust regulations, geopolitical risk, and confidence in the stability of equity markets. On the other hand, PE buyers, especially those focused on the middle market, are less exposed to the same headwinds, and seemingly more willing to put money to work now. 

Either way, we asked company executives to weigh in on what is on their minds heading into this momentous election, and how the outcome could impact their companies or sectors. Here is what they had to say: 

Rob Painter, CEO of Trimble [NASDAQ:TRMB], a multi-billion-dollar global software provider  

We are keeping a close eye on industries like construction, transportation and agriculture, which are part of the backbone of the U.S. economy and are important customer segments for Trimble. For example, we hope that whoever is elected will make technology-enabled investments in our nation’s infrastructure, much of which is long overdue for an upgrade. By making infrastructure a priority, the next administration can make a positive impact on fundamental and sustainable job creation, while improving the lives of Americans through the expansion of broadband access and better quality and safer roads, bridges, utilities and more. Expanded broadband access will further enable Americans in rural areas to better participate in the digital economy. We also hope that whoever is elected will make responsible trade and tax policy decisions that enhance the competitiveness of U.S.-based multinational companies.  

Nancy Ham, CEO of WebPT, a provider of rehab therapy software   

We serve outpatient physical, occupational, and speech therapy practices, whose success is driven by their ability to deliver great care at appropriate levels of reimbursement. Considering nearly 25% of their patients are Medicare beneficiaries, the most urgent issue facing the rehab therapy industry is the 9% cut to Medicare reimbursements which is slated to go into effect 1 January, 2021. A payment cut of this magnitude will have a severe and immediate impact on all rehab therapy providers who treat Medicare patients, especially during a time when many practices are still recovering from this year’s economic shutdown. At present, the only way the cuts can be repealed is for Congress to intervene. 

Ben Persofsky, executive director of the Brown Brothers Harriman Center for Family Business  

Broadly speaking, family business owners don’t like uncertainty. They can think through and adapt to circumstances that they know, but it’s harder to plan for situations where the outcome and timing are both uncertain. Right now, the three big issues presenting uncertainty for family business owners are Covid-19, taxes and the balance of power in the federal government. With respect to Covid-19, family business owners want to know that their candidate is going to do everything they can to manage the pandemic since it has affected both the workforce and, in most cases, the customer base too. The continued erratic effects in these areas are challenging to manage, so business owners are looking for impact that provides greater stability now and in the future. Regarding taxes, many business owners had moved some operations (previously offshore) back to the U.S. due to a change in tax treatment. It is unclear what will happen with those policies during the next four years. Uncertainty around taxes also clouds the decision-making behind whether family business owners buy or sell businesses. Finally, an imbalance of power allows one party to make sweeping changes that may or may not be favorable to business owners across the board. While owners tend to have strong arguments for why they do or don’t like a particular candidate, the policies of the candidate they favor may not always be aligned with business owners overall. In this regard, family business owners mirror the divisions we see within the country. 

Stan Middleman, CEO of Freedom Mortgage, one of the top 10 largest U.S. direct mortgage lenders  

Our business will be impacted by a change in interest rates. If the outcome is a sweep by Democrats, it is likely rates will go up, reducing our opportunities for refinancing yet improving the value of our servicing portfolio. The idea is more spending drives inflation. If Republicans win across the board, things stay where they are and ultimately rates will head up as the economy improves, but more slowly. I think if the Senate is controlled by the Republicans and a Democratic president is elected, that would lead to lower interest rates as more stimulus would be required through a deadlocked environment.  

Corbin Petro, CEO of Eleanor Health, a provider of mental health and substance misuse treatment services

This is a critical election for the healthcare sector, which is significantly impacted by policies at both the federal and state levels. At the federal level, we are hopeful that the administration will maintain expansion of health insurance coverage, increased development of value-based payment models, and support of telehealth and mental health. This would continue the work of previous administrations in ensuring Americans have access to evidence-based, affordable, outcome-oriented mental health care. At the state level, federal policies like Medicaid expansion have historically had an option for states to opt in or out, and we’re hopeful that state legislatures and governors will continue to opt in to this important expansion of coverage needed by so many Americans. Finally, elected officials lead by example in the language they use, which impacts our work reducing stigma in treating mental health and addiction as chronic illnesses.

Siddhartha Sachdeva, CEO of Innowatts, an AI-enabled energy tech company  

The energy space will see big changes over the next four years — but they’ll be driven primarily by market forces, not by the occupant of the Oval Office. Consumer demand for sustainable, resilient, and affordable energy will drive a push for decarbonization, so the real question is how Washington will respond to that transformation. Planet-friendly policies could speed the transition to a zero-carbon grid, but any excessive regulations could also complicate things for energy providers. Either way, though, the next administration will preside over a period of innovation and growth for America’s energy sector. 

Carl Coyle, CEO of Liberty POST, an early childhood special education and autism therapy services provider  

Most important to our industry is the certainty of federal support to the states because we are so tied to the federal dollar through Medicaid. In New York, for example, there has been a 20% withholding of funding to all counties and school districts in expectation of receiving federal support to the tune of USD 59bn. Without federal funding, that 20% “withholding” will become a cut. and the New York law that says school-assessed property taxes cannot go up by more than 2% annually will likely be repealed, causing everybody’s property taxes to go up. A Biden win is more likely to positively impact states, as he has shown more willingness to expand the Cares Act. But more important than who is elected president is how the House goes. If the Democrats have the majority, they are likely to pump more money into the states. 

Paul Paradis, president of Sezzle [ASX:SZL], a buy-now-pay-later payments processing company  

Our business is driven by consumer spending. We saw significant usage of our platform right as the first stimulus came into the market. The shift in spending patterns from in-store to online was a huge tailwind for us. It had a major impact on consumer confidence with people being able to afford things they needed or wanted because some money was coming in. Our solution caters specifically to young people or those that don’t have traditional credit, and that stimulus check was extremely important to our customer base. So the biggest impact for us is whether or not another stimulus bill will be passed. One other thing, if you would assume that Biden was going to be more strict about state shutdowns – closing malls and stores if infection rates rise – that could actually be another tailwind for our business.

Mark Cherney, CEO of U.S. Urology Partners, a physician management services organization 

Most important is that we see a quick conclusion to the election with the least amount of disruption. In my 45 years in healthcare, I have not seen an election that has been detrimental to the healthcare sector and I do not anticipate significant changes with this one. I think pre-existing conditions are here to stay, and all the noise around eliminating this benefit will not hold water. If anything, we are seeing more people with insurance coverage. The shift to value-based care is creating better outcomes while reducing costs, making healthcare more affordable and accessible. There will always be reimbursement cuts when utilization runs hot, but the burden of proof to reduce costs while maintaining or increasing quality care lies with the providers, who must be more imaginative and creative with cost effectiveness. The winners in healthcare are those who innovate.

Jeff Sheban is a Midwest-based journalist for Mergermarket. He can be reached at jeff.sheban@acuris.com. Deborah Balshem (mmreporter@ymai.com) is a senior freelance reporter who covers multiple industries for Mergermarket from Fort Lauderdale. Yiqin Shen is a New York-based senior reporter with Mergermarket and Dealreporter, covering healthcare. She can be reached at yiqin.shen@acuris.com.

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