By Ben Dummett and Cara Lombardo
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 1, 2019).
A flurry of mergers and big initial public offerings in the U.S.
make it the runaway success story in global deal making, standing
in contrast to sluggish activity in Europe and Asia.
Emboldened by the still-strong U.S. economy and a lofty stock
market, chief executives in the U.S. are making big bets to expand
geographically, cut costs and access new products.
The latest example: U.S. drugmaker AbbVie Inc. agreed last week
to acquire Botox maker Allergan PLC for $63 billion, paying a 45%
premium for the Dublin-based pharmaceutical company.
That and a handful of other $10 billion-plus deals -- led by the
$86 billion planned tie-up of aerospace-parts maker United
Technologies Corp. and Raytheon Co. -- spurred a 20% jump in U.S.
mergers volume to a record $1.05 trillion in the first half of the
year from the same period in 2018, according to Dealogic data.
Meanwhile, heightened political tensions and slowing economic
growth beyond the U.S. weighed on global deal volume, which fell
11% to $1.97 trillion, pulled down by a 53% decline in Europe and a
23% drop in Asia excluding Japan.
That trend was also on display in the IPO market as gains in the
U.S. led by Uber Technologies Inc.'s $8.1 billion issue contrasted
with declines in Asia and Europe, the Dealogic data showed.
In Europe, corporate heads have had to contend with uncertainty
over the outcome of the fractious Brexit talks. Another drag: signs
of an economic slowdown in Germany, Europe's largest economy,
following a report in May of an unexpected rise in the country's
jobless rate. In Asia, China's slowing economy, which is struggling
due to U.S. tariffs on Chinese exports, is testing the confidence
of CEOs who want to strike deals in that region.
Bankers expect deal making outside the U.S. should remain
steady, if not show some renewed strength in the year's second half
as companies seek to stay competitive.
"We are living in a much trickier political world, a much
trickier antitrust world, but corporates around the world have to
continue to take action to generate value and that does create
deals," said Larry Slaughter, an executive vice chairman at Bank of
America Merrill Lynch.
Aside from economic growth and trade disputes, government
regulators and activist investors pose some of the biggest
challenges for deal makers, even in the red-hot U.S. market.
Along with the United Technologies-Raytheon merger, two other
big transactions -- Bristol-Myers Squibb Co.'s $81 billion
agreement to buy Celgene Corp. and Occidental Petroleum Corp.'s $38
billion deal for Anadarko Petroleum Corp. -- have met resistance
from activist investors. They have argued buyers are overpaying or
muddling their strategies.
Activists are traditionally known for pushing sellers to seek
higher prices. The fact that they are agitating on the buy side
reflects the heady stock market and fear that acquirers could be
paying too much, deal advisers say.
Indeed, AbbVie shares plummeted 16% on news of its deal for
Allergan, wiping nearly $20 billion off the drugmaker's market
value, though has regained some ground in the days since.
Regulatory crosscurrents are shown by antitrust resistance from
the U.S. Justice Department to Sprint Corp.'s plan to merge with
T-Mobile US Inc., as well as opposition from some state attorneys
general. It remains to be seen whether the wireless-phone companies
will be allowed to proceed with their plan to combine.
Caution is evident in deals worth less than $10 billion. These
typically account for the majority of deals by dollar value and
bring many bankers the bulk of their advisory fees. The value of
these deals in the first half of the year dropped sharply in the
U.S. from a year earlier.
While activists in some cases have tried to upend deals, they
can also spur them. The threat of an attack from well-known
activist firms like Elliott Management Corp. or Third Point LLC is
pushing companies to re-evaluate their portfolios and in some cases
sell off assets to try to boost profits and stock-market
At the same time, global buyout firms such as EQT AB, Blackstone
Group LP and Apollo Global Management LLC are ready buyers for
these businesses as they seek to invest record amounts of cash.
In May, Nestlé SA, which counts Third Point as a shareholder,
sold its skin-health unit to an EQT-led group for $10.1
Buyout firms "are out there hunting hard," said Dwayne Lysaght,
co-head of M&A at JPMorgan Chase & Co. for Europe, the
Middle East and Africa. "They have a strong preference for
carve-out deals from public or private companies."
Write to Ben Dummett at email@example.com and Cara Lombardo at
(END) Dow Jones Newswires
July 01, 2019 02:47 ET (06:47 GMT)
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