Dead, delayed, renegotiated -- at least $87 billion worth of deals have been thrown into chaos this year in the midst of the world’s economic and pandemic upheaval.
The unprecedented disruption in mergers and acquisitions has swept across a myriad of industries, from travel, retail, real estate and energy to even seemingly sheltered sectors such as finance and technology. In dollar terms, dealmaking has slumped by more than 70% in the U.S. and some 55% globally compared with a year ago, according to data compiled by Bloomberg.
The weak M&A environment -- the $199 billion in deals in April, May and June was the lowest since at least 1998 -- underscores how corporate executives have retreated to the sidelines in the face of the drastic change in economic outlook. The only positive sign is that deals started to creep up in June, albeit from a weak prior month.
“This is a major seismic shock,” said Mark Shafir, global co-head of M&A at Citigroup Inc. “It feels like there’s more disruption this time than I recall in the financial crisis 12 years ago.”
Here’s a look at the various ways deal-making has come to a halt.
Kaput
More than 10 agreed deals worth about $20 billion have been terminated by mutual consent by buyer and seller. Woodward Inc. and Hexcel Corp’s abandoned $6.4 billion merger was the biggest announced deal to be called off. The transaction would have created one of the world’s largest aerospace and defense suppliers.
The latest significant addition to the list is Ally Financial Inc., which last week terminated its $2.65 billion deal to buy the subprime credit card lender CardWorks Inc., citing “unprecedented economic and market conditions resulting from the Covid-19 global pandemic.”
Another dead deal in the financial services area: Texas Capital Bancshares and Independent Bank Group agreed to abandon their $3.1 billion merger in May. The lenders’ boards pointed to the “significant impact of the Covid-19 pandemic on global markets and on the companies’ ability to fully realize the benefits they expected to achieve through the merger.”
In Court Fights
At least 15 deals worth more than $20 billion are in dispute as buyers and sellers argue over the future of their transaction.
The latest is mall landlord Simon Property Group Inc., which wants to abandon its $3.6 billion deal for rival Taubman Centers Inc. The pair announced a merger in February, a few weeks before the coronavirus shut down much of the U.S. economy, forcing stores to close as shoppers stayed home under lockdown orders.