Merger Meltdown

The Pfizer-Allergan merger is dead, and several other large deals have issues.

Last year was a big deal -- for deals. About $3.8 trillion of mergers and acquisitions were announced worldwide, setting a new record. 1 For bankers, happy days were here again.

Well, sort of.

Raking It In (On Paper)

Here were the leading advisers on deals in 2015, adjusted to reflect Pfizer-Allergan's deal collapse. Pfizer's bankers included Guggenheim and Goldman Sachs, while Allergan used JPMorgan and Morgan Stanley.

Source: Bloomberg

Includes M&A, major investments, joint ventures and spinoffs. Excludes transactions that have been terminated.

Only about half of that transaction volume (and accompanying banker fees) is etched in stone. Mergers representing $1.6 trillion still haven't crossed the finish line, and some of the biggest ones are now falling apart or at risk of doing so. The largest of them all -- Pfizer's $160 billion takeover of Allergan -- succumbed on Wednesday to new U.S. Treasury Department rules intended to stymie tax inversion transactions, and which seemed to specifically target this one. Pfizer had always acknowledged the deal was key to the drugmaker relinquishing far less of its profit to taxes. 


That's one point for the government. Will the Treasury and/or antitrust authorities scuttle other larger deals? Guessing what regulators will do is a fool's errand, but a scenario in which enough deals fall apart to take away 2015's record title isn't improbable. Without Pfizer-Allergan, last year's tally already drops to $3.6 trillion, now only $190 billion above the previous record in 2007.

Two health-insurance mega-mergers face a regulatory hurdle. The Justice Department's top antitrust official said last month that Anthem's $50 billion acquisition of Cigna and Aetna's $29 billion acquisition of Humana (figures include net debt) are a "game changer" for the industry and require tough scrutiny. There's also the shaky merger between pipeline operators Energy Transfer and Williams. The value of that deal has plummeted by more than $20 billion amid weak oil prices, and now the companies say that the earnings benefit of combining will be "materially less" than previously thought. 2

Held Up

How sturdy is 2015's M&A record? Some of last year's biggest takeover offers are running into trouble. The largest of all, Pfizer's plan to merge with Allergan, was quashed this week by new anti-inversion rules.

Source: Bloomberg

Leaving aside bankers' fees (no small matter), there's a ton of shareholder value riding on these deals as well. Add to that the slog Halliburton and Baker Hughes shareholders have endured. The oil-services companies announced their transaction in November 2014 and still haven't offered enough remedies to appease regulators concerned about the industry's No. 2 and No. 3 players (behind Schlumberger) consolidating into one. On Tuesday, the Justice Department was said to be planning to file a lawsuit to block the deal, which is worth $28 billion, down from about $38 billion when it was struck. And the stocks? Both have lost about a third of their value since the companies announced their combination.

When the merger wave was at its height last year, we began to question the motivations and whether it would really enhance the value of these companies -- or if it was simply a sign that some giant corporations have run out of ideas for boosting their stock prices. History shows that mega-deals often don't work. Everyone focuses on the proforma revenue and synergies projections, but the hard part is after the deal closes and management teams need to get to work. 

Now, it seems, mega-deals face a bigger problem than integration -- and that's getting them done in the first place. 

--Rani Molla contributed graphics to this article.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
  1. This figure doesn't include other types of transactions, such as minority investments and spinoffs, that also took place. It does include Pfizer-Allergan.

  2. On Wednesday, Williams said it began litigation against Energy Transfer because the company's private offering for convertible preferred units is a breach of their merger pact.

To contact the author of this story:
Tara Lachapelle in New York at

To contact the editor responsible for this story:
Beth Williams at

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