The U.S. Election: How Will It Impact Our Clients’ Businesses?
In this year marked by so much uncertainty, the U.S. election was closely followed by people throughout the world. President-elect Biden promises to bring significant changes that will impact businesses and industries both in the U.S. and internationally. As we look ahead to January 2021 and beyond, we asked our lawyers around the globe to share their insights on what the Biden administration will mean for our clients when it comes to:
Regulatory Enforcement and Investigations | The U.S. Capital Markets and the Securities and Exchange Commission
Environment, Social and Governance | Energy and Infrastructure | U.S.-UK Relations | Federal Employment Law | Cross-Border Tax
Deal-making in the U.S. and Across Borders
“In the near term, low interest rates and ample dry powder should continue to feed M&A activity, particularly from the sponsor-side. The wild card will remain the pandemic, particularly for hard-hit industries like hospitality and travel. Some of the longer-term impact will depend on whether control of the Senate shifts to the Democrats following the runoffs in Georgia. Tax policy is one area to watch—though tax-related decisions always incentivize deal behavior, tax treatment is only one of the variables in modeling a deal. Stimulus spending is another issue that will be impacted by whether control of the Senate shifts. If broad-based programs garner support, look for increased opportunities in those industries likely to benefit, such as infrastructure and clean energy. Lastly, Biden’s comments and history suggest that increased regulation of various industries should be expected. That might counterintuitively result in more deal flow in those spaces, as players divest assets and consolidate positions in industries unlikely to see growth under the new administration, such as fossil fuels.”
“The Biden campaign focused on fiscal changes which would principally affect U.S.-domiciled private equity (PE) funds, particularly in relation to corporate and capital gains taxation. The impact of his victory on European funds and in the European buy-out market, at least in the immediate term, is more difficult to discern. Many international funds are likely to welcome an administration which will be more predictable than its predecessor, especially on international trade and the easing of relations with China. This will have a markedly positive impact on cross-border activity.
“Managing the COVID crisis will be a key focus of the Biden administration and this is likely to have a corresponding impact on deal-making in the healthcare industry. With increased antitrust scrutiny in the U.S., mergers between healthcare providers are likely to face stiffer resistance, opening the doors for more PE investment. Similarly, Biden’s green credentials are likely to increase demand for sustainable energy assets, which the PE industry is well placed to capitalize on.”
Finance and Restructuring
“The election uncertainty has resulted in considerable market volatility. I think we would expect a return to stability in the U.S.-EU relationship, but some increased uncertainty for the UK in terms of a trade deal with the U.S. The long-term effects on cross-border finance transactions will depend on President-elect Biden’s ability to implement his policies, and the resulting impact on M&A activity. Overall, however, the continued low interest rate environment and availability of capital will mean that deals will continue to be done, hopefully with increased cross-border activity, albeit with one eye to the proposed changes, such as tax hikes, and with a focus on certain sectors, such as infrastructure and clean energy.”
Hong Kong and New York
“The incoming Biden Administration is expected to bring a return to relative normalcy, a less confrontational and more globalist approach to international and business relations, and, accordingly, an incrementally positive impact on cross-border deal-making. We are in a period of dramatic change around the world. New technologies have fundamentally changed many aspects of commercial and everyday life—and businesses everywhere are working through myriad challenges posed by a global pandemic and consequent economic dislocations. Investors have nearly unlimited capital (including their own highly-valued stock) to deploy, as well as inexpensive and easily-accessed debt available to use in executing deals and—in many cases—a willingness to hunt for targets around the world. Many companies are struggling, needing capital or an acquirer to survive. So there are conditions in many places and industries that are very favorable for deal-making in the coming several years—irrespective of who is in office in the U.S. and elsewhere.”
Jong Han Kim
“One of President-elect Joe Biden’s top priorities will be to pursue energy policies that will help the U.S. achieve a cleaner energy economy and net-zero emissions by no later than 2050. This coincides with the new economic initiative announced by South Korean President Moon Jae-in, called the Korean New Deal, which focuses on converting the Korean economy into a low-carbon economy. As the two governments’ timely initiatives pursue similar objectives, I expect significant cross-border business activities in this field. In particular, I anticipate increased M&A deals involving clean energy technologies, including electric and hydrogen-fueled automobiles, rechargeable batteries, solar and wind power, and emissions reduction.
“The impact of the Biden administration will be generally positive. There will likely be more corporate transactions in Asia, particularly those involving China. TPP-type trade enhancements are also expected, which would accelerate the pace of trade volume and growth in the region.”
Regulatory Enforcement and Investigations
Global Trade Controls Practice
There are a number of regulatory areas in which we should expect to see an uptick under a Biden Administration. When it comes to financial services regulation and investigations, not only will we see a greater focus on consumer protection/fraud, but we also should see increased regulation of cryptocurrencies and commodities trading activities, renewed investigation in market rigging, anti-money laundering, sanctions and anti-corruption focused on financial services. Securities law enforcement will also pick up. In addition, I would expect an increase in merger investigations, as well as a renewed focus on cartel activities. However, it remains to be seen whether monopolization actions against large data-driven companies (like the Google antitrust case) will be continued or curtailed. Lastly, the U.S.-China technology and strategic rivalry is not going away. While the U.S. will scale back tariff- and other trade-remedy action, export controls, trade secret theft prosecutions, human rights-based sanctions and other actions will continue.
White Collar Defense
“Much discussion now is focused on whether a Biden administration will provide more certainty and predictability on U.S. policies on China over the next four years. However, a change in administration does not necessarily mean that the new administration will be weak on enforcement and sanctions affecting Chinese companies. Regulatory scrutiny of Chinese involvement will likely continue, especially in the areas of technology, telecommunications, and network infrastructure. There may be more predictability in the process, but the same issues remain, for instance in national security and data privacy. It may also be that the new administration might take a more multilateral approach, rather than necessarily singling out a particular country or territory. We may see a return to more conventional enforcement against Chinese companies by the Department of Justice (DOJ), though by no means less intense.”
“The U.S. Food and Drug Administration (FDA) has been busy reviewing hundreds of Emergency Use Authorization applications, and numerous COVID-19 vaccine and therapeutic treatments, and that focus will continue. However, under the Biden Administration, new FDA leadership will use the agency’s enforcement powers to move beyond the current focus on fraudulent COVID products and will select targets to remind the industry of the FDA’s key quality and public safety goals, even as it continues to prioritize pandemic-related issues. Certain enforcement powers will likely receive even more attention, such as consent decrees and import alerts. Now would be a good time for companies to proactively ensure they don’t become an illustrative enforcement target.”
“Additional areas of focus for the FDA under the new administration will be cell and gene therapies, where the agency will insist on vigilance for Chemistry, Manufacturing, and Control issues throughout the cell and gene therapy lifecycle, and medical devices, where the FDA will continue to focus on device safety and digital health policy.”
The U.S. Capital Markets and the Securities and Exchange Commission
“The markets have been remarkably robust in the fall and we are seeing many signs of activity into early 2021, with quite a few deals in process or getting started. Which political party holds the White House often is not as important for capital markets regulations, compared to other regulatory areas. However, one area where more regulatory clarity would be helpful for our clients is the digital currency and cryptocurrency space, which is going to continue to be important.”
White Collar Defense
“When it comes to leadership changes at the U.S. Securities and Exchange Commission (SEC), presidents seem to want to make a splash with someone who sends a strong message. President-elect Biden could send the message that he intends to be tough on Wall Street by naming a former U.S. attorney to the SEC chairmanship. Given Preet Bharara’s history with President Trump, he seems like a likely candidate. Another solid candidate would be U.S. District Judge Valerie Caproni in the Southern District of New York, who formerly led the SEC’s Los Angeles office.”
Data Privacy and Cybersecurity across Borders
Partner and Vice Chair
Privacy and Cybersecurity Practice
“Under a Biden administration, there’s likely to be a lot more willingness to try to have the U.S. government reassume the role of a trusted country and more commitment to various rules that will give the EU government much more comfort. Everyone understands that some data transfer solution needs to be put in place and that our global economy depends on it.”
"The UK is the process of detaching itself from the European Union (EU), which increases focus on its relationships with countries outside the EU. The UK’s relationship with the United States is therefore now more important than ever. U.S. financial institutions have a strong presence in London and striking a mutually beneficial trade agreement with the U.S. has been a priority for the UK. The change in administration will also have an impact on the progress of major global initiatives. Environmental, Social and Governance (ESG) issues are key across finance and other industry sectors. The EU has been more advanced than the U.S. on developing requirements in this area. This looks set to change and greater political focus on ESG issues will drive compliance towards more sustainable investments."
Environment, Social and Governance
“Environment, Social and Governance (ESG)-related rulemaking under the current administration served to discourage ESG investing in retirement plans, and backtracked on efforts to standardize ESG disclosures. I would expect President-elect Biden’s new administration to be a boost to the impact investment sector even with a divided Congress. Biden’s agenda has consistently called climate change an ‘existential threat to humanity,’ and recommended a transition from fossil fuels to renewable energy and an inclusive, green recovery. The current thinking is that ESG goals generally align with the values expressed by the Biden camp, above and beyond the obvious climate change issue. My hope is that a new Biden administration will advance ESG investing and enable rule makers like the SEC and CFTC across multiple realms of E, S and G.”
Energy and Infrastructure
Energy and Environmental Practice
“Under the Biden administration, there will be a number of positive developments for our clients in the energy and infrastructure space. Most notably, we expect to see a federal infrastructure bill that will funnel considerable money to the states. President-elect Biden will also reverse a number of Trump administration policy changes related to energy and climate change. On the other hand, one critical question will be which Trump administration permitting and environmental review streamlining reforms Biden keeps in place. Additional legal questions will involve which Trump era regulatory reforms can be reversed more quickly—and which will require formal notice-and-comment rulemaking.”
Federal Employment Law
“There is no question that one of the Biden Administration’s priorities is swinging the pendulum of federal labor law (and enforcement of it) back to where it was under the Obama Administration. To the extent employers have seen more business-friendly decisions and enforcement positions from federal labor agencies, like the National Labor Relations Board and the Department of Labor, during the Trump Administration, that will certainly be changing. Given that the Protecting the Right to Organize Act (the PRO Act) is now unlikely to advance given the Democrats’ failure to take control of the Senate, we expect the Biden Administration to look for ways to advance the agenda embodied in that Act in a piecemeal fashion through federal labor agencies. Employers will want to watch these developments closely, keeping at hand the policies and trainings they changed under the Trump Administration, so that they can be located and updated quickly as the next year unfolds.”
“I would not be surprised to see an increased focus on pay equity issues under the Biden administration. Vice President-elect Kamala Harris put forward an aggressive pay equity proposal during her campaign for President. While we do not know if the President-elect or Vice President-elect will attempt to advance new federal pay-related legislation once they take office, I expect that under a Biden administration, pay equity will again become a focus of the federal agencies.”
“Although President-elect Biden is seemingly keen to increase U.S. taxes, it will be interesting to see if whether these will be implemented on Day 1 or whether such tax increases will be possible in light of the coronavirus and its effects on the U.S. economy. Biden has previously stated that his priority would be to manage the coronavirus crisis and especially its economic impact. This also depends on the control of the Senate as to whether any of Biden’s tax plans will actually take effect. Given the potential for increasing U.S. taxes, European investors may need to revisit their financial models. This may include revisiting their financial projections on expected interest deductibility and related matters. It will also be interesting to see if there is a change in stance on global/OECD measures such as taxing digital services.”