By Ben Dummett and Cara Lombardo 

This article is being republished as part of our daily reproduction of 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 performance.

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 billion.

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 and Cara Lombardo at


(END) Dow Jones Newswires

July 01, 2019 02:47 ET (06:47 GMT)

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