Still reeling from the impact of Brexit, the global legal profession is this morning coming to terms with the shock victory of controversial Republican nominee Donald Trump in the US presidential election.
The US businessman (pictured), who has no previous political experience, clinched victory against Democrat veteran Hillary Clinton in a handful of key swing states including Florida, Ohio and North Carolina. He will take office in January supported by a Congress that is fully under Republican control.
Some of Trump’s key campaign promises include a renegotiation of US-China trade deals, opposition to particular trade agreements such as NAFTA and the Trans-Pacific Partnership as well as stronger enforcement of immigration laws and the controversial wall along the US-Mexico border. It is unclear how many campaign promises will translate into policy, likely plunging the markets into short-term volatility as a result.
Many in the City have described the parallels between this year’s Brexit vote and a Trump victory, including the fact that professions generally and in particular the legal profession, were aligned in their support for a Clinton presidency.
Speaking to Legal Business and comparing the similar ‘shock’ caused by Brexit, Slaughter and May corporate heavyweight Nigel Boardman said: ‘Trump is obviously an outsider coming into politics and the markets will therefore be cautious for the short term until it becomes clear how he is going to implement his policies.’
A partner in a US firm in London added: ‘For me, it is a huge protest vote against the last 15 to 20 years of liberal democracy and he is somebody who stands for not being part of the establishment. It’s very depressing, but at the same time it is inevitable. It makes Brexit now look rather tame.’
Paul Dolman, head of private equity at Travers Smith, struck a more positive tone, noting that although there is likely to be a slowdown in M&A activity, the US political structure will be able to reign in the more destructive effects of a Trump presidency.
‘M&A doesn’t like uncertainty – we saw that after Brexit, and the effect on deals from oil price volatility. There will be a pause – Trump is such an unknown and his policies are quite aggressive. That can pour water on the flames of M&A. Brexit was bigger, however, in terms of its effect, and there are US constitutional checks and balances in place to prevent anything too dangerous happening.’
Richard East, co-managing partner of the London office of Quinn Emanuel Urquhart & Sullivan said that despite the dampening effects on M&A, lawyers are likely to see an uptick in litigation as Trump’s policies raise constitutional issues.
‘I would expect there will be a huge initial market reaction, given that a Trump win was not priced in. Then I would expect to see the markets settle down as we move to a new normal. This thing will take some time to play out. It wouldn’t surprise me if the pound strengthened against the dollar, as people perhaps realise that the pound is potentially undervalued and given the uncertainty in the US.
‘Trying to be positive about this, and from our perspective, it might be good for litigation in the sense that there might be more activity in the US courts, and perhaps the US Supreme Court, as a consequence of this victory. It wouldn’t surprise me, if a number of Trump’s key policies raised significant constitutional issues that found their way into this venue.’
David Higgins, corporate partner at Freshfields Bruckhaus Deringer, said that globally the uncertainty might be around China. ‘If you were buying a business in the US that has a big China component you would want to see how China relations are going to go. Obviously you’d want to see whether he’s going to do anything dramatic with Mexico and some of the other trade deals.’
Added Higgins: ‘From a private equity perspective there may initially be a bit of a pause because there is a bit of uncertainty about exactly what Trump is going to do. In broad terms though, arguably he’s a low tax guy so you would have thought that would be positive for business. If he’s going to try and regenerate the economy through spending, it may mean the jolt for the economy isn’t as great as we think.’
Dentons global chairman Joe Andrews added: ‘Rather than being flat, this is a world of increasing walls, and the importance of truly understanding the traditions, the culture, and the way of doing business in each community has never been higher. Globalisation will continue, but it will take more sophisticated and culturally attuned business leaders and advisers.’
kathryn.mccann@legalease.co.uk
Read more: ‘The M&A Report’ – In a tough year for the deals market who will step up?’
