October was a slow month for mergers and acquisitions, but it's too soon to assume this means 2014's takeover boom is over.
Globally, companies struck about $232 billion of takeovers this month through yesterday — the lowest amount since March and below the average of about $300 billion in each of the prior six months.
Rocky stock and debt markets, political uncertainty abroad and the U.S. midterm elections in November all get some blame for giving buyers a reason to slow the torrid pace of deals seen earlier in the year. With two months still to go, 2014 is already the best for takeovers since before the financial crisis, data compiled by Bloomberg show.
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Bankers and lawyers who advise on takeovers say they've got a robust pipeline of deals in the works. Some deals delayed in October could appear in November and December, making the final months busier than usual.
"Clearly, there has been a great deal of market uncertainty," said Frank Aquila, a partner at Sullivan & Cromwell LLP in New York. "If we get to the end of the quarter, and November and December are just like October, then you start to wonder whether there's a slowdown in M&A. If they are just like the rest of 2014 has been, then you forget about October — and dismiss it as an outlier."
One deterrent — the U.S. government's crackdown on purchases that help companies shift their tax domicile abroad — could have a lasting impact. It led to one high profile termination in October: AbbVie Inc.'s planned $52 billion acquisition of Shire Plc.
The Chicago-based company won't make another $50 billion-plus takeover again, Chief Executive Richard Gonzalez said today, citing unique characteristics about Shire that made it "out of the normal course of our M&A strategy."
That wasn't the only deal to die this month. Iliad SA pulled its bid for T-Mobile US Inc., Canadian Pacific Railway Ltd. ended its exploratory talks with CSX Corp., and Shutterfly Inc. said it will remain an independent company after Silver Lake Management LLC shelved an attempt to buy it.
Not everyone has been scared away by the government, though. Pfizer Inc.'s Chief Executive Officer Ian Read said this week that the U.S. Treasury Department's rules — which remove some of the benefits of an offshore tax domicile — won't stop America's biggest drugmaker from moving overseas if it finds an attractive target.
And interest rates remain low, while stock markets are stabilizing quickly.
"Those reasons support a robust M&A market, until there's some sort of event that stops the party," said Howard Spilko, chair of M&A at law firm Kramer, Levin, Naftalis & Frankel.
Bloomberg News
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