Quick read
President Trump has designated Andrew Ferguson as the new FTC Chair, signalling a shift toward reduced regulatory intervention and faster deal approvals, likely boosting merger and acquisition (M&A) activity in 2025. This is further supported by record available funds in private equity and a favourable interest rate environment. Small- to mid-cap companies are likely takeover targets as they are trading at historically low valuations. The WAM Global Portfolio is focused on high quality undervalued growth companies with a long runway of compound earnings growth. These companies are not reliant on M&A to succeed however these events can serve as a positive catalyst to unlock shareholder value.
Long read
Trump appoints new Federal Trade Commission Chair
Lawyer Andrew Ferguson was designated as Chair of the U.S. Federal Trade Commission (FTC) by President Donald Trump on 20 January 2025. Ferguson has been a FTC commissioner since April 2024 and succeeds Lina Khan, who led the regulator since 2021 under former President Joe Biden.
Biden appointed Khan to address concerns about the concentration of power among a few dominant companies. Her tenure saw the FTC adopt a more litigious stance, including efforts to block high-profile mergers such as the $24.6 billion deal between Kroger and Albertsons, which the agency argued would harm consumers. Under Khan’s leadership, the FTC intensified its scrutiny of company consolidation across various sectors, including semiconductors, defence, energy, consumer products, healthcare, and pharmaceuticals. This led to longer review times and greater uncertainty about deal outcomes, making it challenging for financial markets to price stocks without clarity on deal approvals or .
In contrast, President Trump has called Ferguson “the most America First, pro-innovation FTC Chair in our country’s history.” Trump has also nominated former Senate antitrust aide Mark Meador to the FTC Commission, giving Republicans a majority on the commission.
Ferguson has been a vocal opponent to the Khan-led FTC, issuing at least 35 dissenting statements relating to specific cases and general FTC actions, including that the regulator had “overstepped the limits of its authority”. Since Ferguson’s designation as Chair, he instigated a vote among the commissioners to give him power “‘to modify’ the previous Commission’s strategic plan ‘and to take any other action’ he deems necessary to comply with [the President’s] Executive Orders”. He has also removed requests for public comment on five topics including “protecting workers from illegal business practices,” “predatory pricing,” and “surveillance pricing practices,” which refer to companies’ use of personal data to set individualised prices.
Our sources close to the FTC anticipate significant changes under Ferguson’s leadership that will likely lead to faster approvals and a greater number of M&A transactions. Some of the suggestions include:
- Increased communication with stakeholders early in the process to encourage solutions. A more pragmatic approach such as divestitures of certain geographies or remedies that may enable suitable deals to proceed.
- Clearer guidelines for corporations to navigate the regulatory process.
- Reduced litigation.
Private capital ‘dry powder’ at record levels
2025 is poised to be a strong year for mergers and acquisitions (M&A). In addition to a new FTC Chair, private equity firms are sitting on record levels of ‘dry powder’ – committed but unallocated capital. For example Blackstone, the world’s largest alternative asset manager, reported $171.6 billion in dry powder at the end of September 2024. And KKR & Co raised $24 billion in new capital during the three months ending September 2024, bringing its total dry powder to $108 billion.
Private equity firms often acquire public companies, aiming to enhance efficiency and profitability before selling them several years later . These firms benefit from a lower interest rate environment, which reduces the cost of financing acquisitions. The U.S. Federal Reserve’s rate cuts in 2024, with potential further reductions in 2025, are expected to drive an increase in M&A transaction volumes and asset valuations. The last two US Fed rate cutting cycles led to a modest uptick in corporate transactions within six months.
Additionally, Trump’s inauguration has reduced election-related uncertainty, providing corporations with greater regulatory and policy clarity for strategic planning
Implications for equity markets and the WAM Global portfolio
These dynamics are expected to have an outsized benefit on small- to mid-cap companies, which are trading at attractive valuations and often become acquisition targets from private equity due to their size. Private equity buyouts generally deliver positive outcomes for shareholders, as the offers typically include a premium over the current share price.
Globally, small- to mid-cap companies are trading at historically low valuations. Over the past three years to January 2025, the MSCI World Small Mid Cap index total return (capital and income) has underperformed the MSCI World index (large caps) by 5% per annum. On a Price to Earnings multiple, historically, the MSCI World Small Mid Cap index traded at a 5% premium to the MSCI World index (large caps). However, for the past three years, it’s traded at an average discount of 9% and is currently trading at a 14% discount.
The WAM Global investment portfolio has benefited from private equity buyouts in the past. One example is Applus, a Spain-based global provider of testing, inspection and certification (TIC) services. Applus was the subject of multiple takeover offers in 2023 from Apollo, a US based asset manager, and then eventually accepted a joint offer in 2024 from TDR Capital and I Squared Capital, UK-based and US-based respectively.
The WAM Global investment portfolio is focused on high quality undervalued growth companies with a long runway of compounded earnings growth. These companies are not reliant on M&A to succeed, however these vents can serve as a positive catalyst to unlock shareholder value.
