As Big Merger Deals Boom, So Do Big Failures
By WILLIAM ALDEN
DealBook
New York Times
August 6, 2014 12:03 pm
Deal making has boomed this year. So has deal breaking.
The two merger attempts that fell apart on Tuesday — Rupert Murdoch’s bid for Time Warner and Sprint’s pursuit of T-Mobile US — are just the latest examples of mergers that weren’t.
So far this year, $428.2 billion of deals have been withdrawn, according to Thomson Reuters data. That is the highest level for this period since 2007, when $566.8 billion of deals were withdrawn. And it far surpasses the level of withdrawn deals for all of 2013, which was $278.5 billion.
The data counts unsolicited offers as deals. In fact, unsolicited or hostile bids accounted for 73 percent of the stymied activity so far this year. The deal values as calculated by Thomson Reuters include net debt.
Biggest Withdrawn Deals
VALUE,IN BILLIONS - TARGET - BUYER - WITHDRAWN
Three of the major bids that haven’t gone through were unsolicited, including the $94.3 billion offer for Time Warner that 21st Century Fox withdrew on Tuesday. Another was Pfizer’s $122.3 billion bid for the British drug maker AstraZeneca, which Pfizer abandoned after it was rejected.
The third was Charter Communications’ $62.6 billion pursuit of Time Warner Cable. That bid was foiled when when Comcast struck a deal to acquire Time Warner Cable for a higher amount. (As it withdrew its bid, Charter did a series of deals to pick up subscribers that Comcast was divesting.)
Another obstacle has been regulators. In abandoning the effort to merge with T-Mobile US, Sprint and its corporate parent concluded that antitrust regulators would not look kindly on a major tie-up in the telecommunications industry, which is dominated by a few large players.
So far this year, $2.5 trillion of deals have been announced, according to Thomson Reuters. But 15 percent of those efforts were later withdrawn.
“This has clearly been the year of the big deal,” said Richard M. Jeanneret, the vice chairman of transaction advisory services for Ernst & Young in the Americas. “I think it’s natural to assume that bigger deals are harder to get done, for a variety of different reasons, from financing to shareholder approval to regulatory support. It’s possible that you could see more deals, if they’re sizable, get more scrutiny.”
But Mr. Jeanneret said he was still optimistic about the deal market, arguing that confidence was running high and deal makers were anxious to act on long-delayed plans.
“Any time you’ve got momentum — and I think the momentum in this market is born out of confidence — I think you’re going to see bigger deals get done,” he said. “Others will try. You’ll see more things attempted.”
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