Deals

Tara Lachapelle is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News.

One of the biggest merger contests of 2015 collapsed last week, but it's merely a blip on the radar. 

Mylan, which failed to secure a $32 billion hostile bid for Perrigo, joins an unusually low number of failed dealmakers this year. Only 310 deals or takeover offers have been canceled, the fewest in more than a decade. 

Deal or No Deal?
Only about 1 percent of this year's more than 22,000 deals have been terminated, compared with a decade average of 3 percent. But this year's figure could still climb.
Source: Bloomberg

It's a divergence from 2014, when more than 1,200 transactions didn't get done and a handful of mega-merger plans were unexpectedly scrapped, leading to huge losses for arbitrageurs who bet on deals. The most painful among them was the termination of a $55 billion deal between AbbVie and Shire on an October day that's now remembered as "Arbageddon." It was one of the biggest casualties of the changes to U.S. rules governing tax inversions. 

Traders also took a more than $20 billion bath one day in August last year after a trifecta of bad news: Sprint ended deal discussions with T-Mobile, Walgreens said its purchase of Alliance Boots wouldn't give it a better tax domicile, and Rupert Murdoch's 21st Century Fox withdrew a bid for Time Warner because the target's board refused to engage in talks. 

This year looks markedly different, with confidence among chief executives high and shareholders still showing support for mergers, even as valuations climb to records and markets remain volatile.

When it came to Mylan's tender offer for Perrigo, investors proceeded with caution because of the high odds that it could falter. So when it did, the negative impact was contained, with Perrigo dropping 6.2 percent on Friday as Mylan surged 13 percent. 

Perrigo Takes The Hit
On Friday, Mylan said it failed to win enough support from Perrigo shareholders to proceed with its hostile takeover. But that wound up hurting Perrigo's stock price instead.

Still, nearly two-thirds of the mergers and acquisitions announced this year haven't closed yet, and some could hit the skids. Remember, Comcast's acquisition of Time Warner Cable was struck in February 2014, and it took until April of this year for it to collapse from the antitrust issues.

Currently pending deals that have raised concerns include Michael Dell and Silver Lake's plan to take on a heap of debt to combine $49 billion EMC Corp. with Dell Inc. Several large health-insurance mergers in the works are up against the Department of Justice's antitrust division, which has pledged a "vigilant" review of the deals.

Shell recently reaffirmed its plan to acquire BG Group after reporting its largest quarterly loss in over a decade amid the prolonged rout in oil prices. So the biggest energy deal of the year may still be OK, but the same might not be true for Halliburton's $35 billion takeover of Baker Hughes. The companies are facing scrutiny from regulators and already had to push back the completion date. There have also been questions as to whether their estimated synergies are too optimistic. 

Meanwhile, Anheuser-Busch and SABMiller -- working on potentially the biggest deal of 2015, at $120 billion, and the largest the beer industry has ever seen --  have addressed their big antitrust hurdle, which was SABMiller's 58 percent stake in MillerCoors. Molson Coors Brewing is going to buy the stake, taking full control over brands such as Coors Light and Blue Moon. 

M&A volume for 2015 ticked above $3.1 trillion last week, and deals representing $1.9 trillion of that have yet to close. Even though a considerable amount of them have expected completion dates extending into the middle of next year, the year's low termination rate bodes well. 

So maybe investors should place less concern on how many deals won't get done, and instead worry about how many shouldn't have happened but did. Having to abandon a potentially good deal is less harrowing than having to undo a bad one.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Tara Lachapelle in New York at tlachapelle@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net