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JP Morgan says one factor could make this a big year for mergers: Trump and the contentious 2020 election

Key Points
  • As campaign season heats up, CEOs expect that 2020 could be defined by distractions from Trump and his Democrat adversaries, according to J.P. Morgan Chase's John Richert.
  • "Most of the CEOs I'm talking to would like to get something done this year and not have to deal with the noise of next year," Richert tells CNBC.
President Donald Trump delivers remarks at a campaign rally in Estero, Florida, October 31, 2018.
Carlos Barria | Reuters

Billion-dollar corporate mergers may be about to get a Trump bump of sorts.

Now that the stock market has mostly recovered from last year's swoon and the government reopened after the longest shutdown in U.S. history, CEOs are once again mulling deals to scale up their businesses or sell themselves to a willing partner.

But there's one date on the calendar that CEOs are eyeing warily: Nov. 3, 2020, according to John Richert, J.P. Morgan Chase's head of regional investment banking. The expectation is that as the election campaign season heats up, uncertainty will spike as a fiery, unpredictable President Donald Trump faces off with Democratic candidates proposing changes to taxes and regulation.

"Most of the CEOs I'm talking to would like to get something done this year and not have to deal with the noise of next year," Richert said. "People are going to really drive hard to get things done this year in a known environment."

Deals in North America hit $2.22 trillion last year, the second biggest total after 2015, fueled by a surge in megadeals of at least $10 billion, according to J.P. Morgan data. But the pace slowed late in 2018 after stock and debt markets seized up and the U.S. government shuttered in December.

Merger prospects turned around recently after markets rebounded in January and February and the Federal Reserve signaled that slowing growth around the world made it pause its campaign of raising interest rates. That soothed concerns that a recession could strike in 2019, giving business leaders a window to attempt deals this year, Richert said.

The deals pipeline has sputtered back to life, and there will be a wave of announcements in the next two to three months, he said.

"Now that the Fed has gone the other direction, and you've had a complete recorrection in markets, people feel good about this year," he said. "What it's really going to come down to is how much of a distraction will the 2020 election be from a confidence standpoint."

Of particular focus for Richert and his team of regional investment bankers are deals in the $1 billion to $3 billion range. He believes that is a sweet spot as megadeals become scarcer as investors shy away from financing the massive transactions.