People in Baton Rouge may have heard that the mood on Wall Street has been downright jubilant following a string of mergers and acquisitions all year that have propelling revenue and investment returns for many shareholders. However, it looks like the great mergers and acquisitions boom of 2014 may have come to a screeching halt.
The first indicator was Rupert Murdoch’s failed attempt to acquire Time Warner. The billionaire media mogul has been rebuffed by his target Time Warner, who even after making an $80 billion offer could not get Time Warner to express interest in a merger or make a counteroffer with his media company 21st Century Fox. When negotiations fell through with Time Warner, 21st Century Fox decided to spend $6 billion repurchasing its shares which probably exasperated the company’s investment bankers.
The second indicator was Sprint’s failure to lure T-Mobile to the negotiating table after it expressed interest in acquiring the cellular telecommunications giant. According to the Wall Street Journal, the acquisition would have valued T-Mobile at about $32 billion. This time around the deal ran aground because of regulatory issues.
The final nail in the coffin for the mergers and acquisitions boom was from Walgreens. Walgreens has been in talks to acquire the European company Alliance Boots but has been under a lot of pressure from hedge funds Jana Partners and Och-Ziff Capital Management to perform a tax inversion as part of the acquisition.
An inversion deal is when a U.S.-based company acquires a foreign company and declares that it has become a subsidiary of the foreign company whereby it garners a lower tax rate which means higher returns for investors. It appeared that Walgreens has decided to go ahead with its acquisition of Alliance Boots but will forgo any inversion deals and thus keep Walgreens based in the United States.
Further putting a damper on merger and acquisitions was the announcement by the Treasury Department of it looking into investigating methods of blocking inversion deals without the need for congressional action.
The business world is constantly evolving, adapting to changes both nationally and globally. Even though mergers and acquisitions are experiencing issues, they still play a major role in the business world. During any negotiations, businesses may benefit from having an attorney close at hand to ensure that no stone is left unturned.
Source: Forbes, “The Mergers And Acquisition Boom Hits A Roadblock,” Nathan Vardi, August 6, 2014