Deals to watch in the Trump era

One scoop to start: BlackRock is in early-stage discussions with Millennium Management about a strategic partnership that could see the world’s largest asset manager take an equity stake in one of the most profitable hedge fund managers, according to people familiar with the situation.

And a new bank partner class: Goldman Sachs has appointed 95 new partners, the biggest class since 2010, in its biennial process to refill the Wall Street bank’s senior ranks.

In today’s newsletter:

M&A on the horizon with Trump back in the White House

Donald Trump’s presidential election win this week has Wall Street cheering from the sidelines: bring on the deals.

The election was always expected to be a turning point for dealmaking, but a Republican in the White House has made advisers even more confident that a wave of deals will not only get agreed — but given regulatory approval.

Some of the biggest deals DD will be watching for over the next several months have also turned into the most lucrative so-called Trump trades.

One of the biggest is Capital One’s $35bn proposed takeover of Discover Financial Services, a union that would fuse two of the leading credit card lenders.

Both of their share prices jumped sharply on Tuesday as it became clear the new administration would in all likelihood ease the path for dealmaking, particularly in the guardrail-filled financial services sector.

“You’re going to not only have turnover in the antitrust agencies, you’re going to have a president who’s very transactional in the way that he approaches things,” said David O’Hara, managing director at MKP Advisors.

It’s not just deals that have already been agreed, but also ones in the pipeline. Many expect a wave of consolidation among mid-sized US banks. While there hasn’t been a formal offer yet, the potential chipmaker merger of Qualcomm and Intel is one DD’s monitoring.

“We’re likely to see some pretty transformational deals announced,” O’Hara added.

Then there’s the tie-up between US Steel and Japan-based Nippon Steel, a $14bn deal that’s in a league of its own. The fact that US Steel is based in Pennsylvania, one of the most critical swing states, played no small part in the transaction getting swept up in political crosshairs.

It’s still under review by Committee on Foreign Investment in the US and the Department of Justice, but both are expected to issue final decisions by the end of the year. If Cfius gives the all-clear, then it would head to the president’s desk for final approval.

President Joe Biden, Kamala Harris and Trump have all said they would block the deal if it were to arrive on their desks, indicating there could be difficulties whichever side of inauguration day any Cfius decision lands. But with the election over, will political leaders’ objections fade?

The sector to watch is oil and gas, say advisers. During the Republican National Convention this summer, Trump was explicit on where he stood on the industry. “We will drill, baby, drill,” he said.

The US already had a major energy sector deal this year with Chevron’s $53bn acquisition of Hess, which received regulatory approval in September. With Trump headed back to the White House in January, it could be the first of many.

The question plaguing Berkshire investors

Deciphering Warren Buffett’s investment motivations is something of an art.

Even with his letters to shareholders and his full-day question and answer sessions at the annual meeting, the so-called Oracle of Omaha often refuses to say why he purchased or sold a given stock (investors in the Buffett Partnership all the way back in the 1960s had this same problem).

It’s in that vein that Berkshire Hathaway investors find themselves again this week, after Buffett disclosed he had further slashed his stake in Apple. The sales pushed Berkshire’s cash pile to a record $325bn* and raised some thorny questions that for the time being, will go unanswered.

Some investors and analysts believe Buffett, who trained under legendary value investor Benjamin Graham — first at Columbia University and then at Graham’s investment firm — is sticking to his principles. They point to Apple’s relatively high price-to-earnings ratio compared with its potential earnings growth.

Others believe something else is afoot, given Buffett’s praise for Apple over the years and a dearth of other investment opportunities, which the 94-year-old has repeatedly lamented.

They have been left asking if Buffett is creating a runway for his successor, or if he sees a crisis on the horizon, giving him reason to raise cash.

Jeff Muscatello, a research analyst at Berkshire investor Douglass Winthrop, said that valuation was unlikely to be “the entire reason” Buffett had been cashing out.

“The nearing inevitable management transition makes it an opportune time to clear the decks for the next generation,” he said.

He’s talking of course about the day Greg Abel, Buffett’s anointed successor, takes over. It was a comment repeated again and again to DD’s Eric Platt, as investors looked for other reasons behind the exit of one of Buffett’s most profitable trades.

“[Buffett] has been a bit more cognisant about how he talks about Berkshire and the future,” Morningstar analyst Greggory Warren said. “He knows he won’t be there that much longer. He doesn’t necessarily want to saddle the guys with situations they have to deal with.”

Investors will have to wait another three months before they know for sure. The company told the FT that Buffett was waiting to share any thoughts on the matter for his annual letter due in February.

*Feel free to quibble directly with Eric at [email protected] if you think the $14.9bn Berkshire owed on recent Treasury bill purchases should be subtracted from the cash figure. Eric disagrees but is happy to hear your points.

The billionaire vying for Treasury secretary

Backing a US presidential candidate is often a smart calculation: if your candidate wins, it could lead to White House power.

He’s canvassing potential candidates to serve as his deputy as he lines himself up to become Treasury secretary — one of the most important positions in the cabinet.

Bessent is a hedge fund manager who served as the former president’s economic adviser. Many view him as a leading candidate for the post in the new administration.

But the billionaire’s not alone in wanting the position. It’s a highly coveted post, and investor John Paulson, who made his fortune shorting the housing market before it crashed in 2008, is another possible contender.

Another option is Robert Lighthizer, the former US trade representative. Senator Bill Hagerty, who served as US ambassador to Japan during the first Trump administration, has also been mentioned in connection with the job.

While Bessent declined to comment, one person close to him said he was only seeking suggestions for a deputy because Trump’s transition team had asked him for the names of candidates who he had helped to vet.

“Some people may have mistaken those as direct interviews, which they were not,” said the person.

Bessent formerly worked as George Soros’s chief investment officer before starting his own hedge fund. In 2016, he launched Key Square with a $2bn cheque from his former employer.

One person familiar with the situation cautioned that it was unclear whether Bessent had been offered the Treasury post or was “measuring the drapes prematurely”.

Job moves

• The UK Takeover Panel has appointed Laurence Rabinowitz as chair beginning next May, when Michael Crane, who currently holds the post, will retire.

• Hilco Global and TPG Angelo Gordon have formed a new joint venture to buy and finance consumer brands and intellectual property, alongside Bluestar Alliance.

Smart reads

Media mergers Comcast and other media giants are looking for alternatives for new and old forms of video distribution, Lex writes. Let the consolidation games begin.

‘Tariff man’ Trump is expected to move quickly and “ruthlessly” in threatening the US’s trading partners with steep tariffs on their imports when he takes office, the FT reports.

Treasure detective Nigel Pickford spent years looking for treasure that went down in a shipwreck, The New Yorker writes. And the whole time, he searched from dry land.

News round-up

Carrefour seeks way out of strategic impasse (FT)

Thames Water receives rival £3bn loan offer from bondholders (FT)

Banks face growing risk as double defaults on commercial loans mount (FT)

European defence bosses expect Trump to demand more Nato contributions (FT)

Carlyle reports best results since recruiting Harvey Schwartz as chief (FT)

Martin Sorrell’s S4 Capital hits record low after latest profit warning (FT)

Wizz Air summer profits down a fifth after engine woes ground aircraft (FT)