Uncertainty, volatility busting megamergers

USA Today

NEW YORK — After a golden decade of record-breaking megamergers, Wall Street's deal-makers appear to be losing their touch.

A series of headline-grabbing mergers and acquisitions have imploded in recent weeks, leaving both management and investors picking up the pieces.

"It's been a difficult year," says Rick Leaman, an executive in charge of mergers and acquisitions at UBS Warburg. "There's a lot of uncertainty in the underlying performance of companies, as well as greater volatility in credit and equity markets."

According to Thomson Financial Securities Data, the percentage of abandoned transactions worth $500 million or more has almost doubled this year. So far, 17 deals have been scrapped, representing 15 percent of announced deals, nearly twice the 8 percent rate last year.

Increased regulatory scrutiny has caused much of the recent heartache:

• The European Union this week formally rejected General Electric's $42 billion acquisition of Honeywell, saying the biggest industrial merger ever would have allowed the U.S. companies to dominate the markets for jet engines and airplane electronics.

• United Airlines and US Airways confirmed this week that they are in talks to terminate their $4.3 billion merger after running into serious opposition from antitrust regulators in Washington.

• Quaker Oats was forced this week to give PepsiCo an additional 30 days to sell its All-Sport beverage unit in another bid to get much-delayed U.S. regulatory approval for their $13.5 billion deal.

Even deals that were negotiated but never announced have unraveled, most notably last month when telecommunications equipment makers Alcatel and Lucent Technologies called off merger talks because of arguments over who would run the combined company.