Obama's Bank Bashing May Ignite M&A

While bull markets and easy financing are critical for strong mergers and acquisitions activity, another important factor is government action. For example, the Telecommunications Reform Act of 1996 led to a surge in M&A as the government allowed competition in local and long-distance communications.

This is why President Obama's recent statement on financial reform is so important, especially to the private equity and hedge fund sectors. He declared: "No bank or financial institution that contains a bank will own, invest in or sponsor a hedge fund or a private equity fund." Symbolically, Obama gave his speech during Goldman Sachs's (GS) earnings call, at which the company reported profits of $4.79 billion. Primarily generating those profits was trading and principal investment activities (which amounted to $6.41 billion in revenues). These are the kinds of activities that Obama considers too risky for financial institutions.