Cold feet on mergers said to be merely a 'blip'
By Matt Krantz
USA Today
Amid what is on pace to be one of the busiest years on record for mergers and acquisitions, some of the buyers are getting cold feet.
Guidant, a maker of medical devices, yesterday sued Johnson & Johnson after the consumer product giant last week said recent product recalls and regulatory investigations would allow it off the hook if it chose to not carry through with its planned $23.9 billion acquisition of Guidant.
Also yesterday, Dutch media company VNU said it is considering walking away from its $6.9 billion buyout of U.S. healthcare information provider IMS Health.
Given the hectic pace of merger and acquisition activity, it might not be a complete shock that some are having trouble.
Already this year, 7,488 deals, valued at $848 billion, have been announced in the U.S., says Richard Peterson, senior researcher at Thomson Financial. That's on track to be the fourth-biggest year overall in terms of deal value and the most since the record $1.7 trillion in 2000, Peterson says.
Despite the deal discord yesterday, there isn't a mass reneging by acquiring companies, says Randy Katz, a transactions group partner at law firm Bryan Cave. "I don't think we're seeing more than a blip."
That seems to be the case this year. Only 110 deals, or 1.5 percent of announced deals, have been withdrawn, Peterson says. That's lower than the 171 (2 percent) and 216 (2.8 percent) withdrawn in 2004 and 2003, Peterson says.
Rather than reflect problems in the M&A market, the deals running into trouble now are doing so for company-specific reasons:
Yesterday, the stock slid $1.40 to $57.52 after Guidant reported its quarterly earnings fell 60 percent and that it is being investigated by the Securities and Exchange Commission.
