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The value of merger terminations in July alone was greater than that for any quarter going back to 1997, according to Mergerstat, a company that compiles mergers and acquisition data. Antitrust regulators killed two immense deals in July, making merger terminations worth an astounding $48.7 billion for the month. In comparison, the value of undone deals in the entire second quarter was $40 billion. The chief culprits: General Electric Co.’s $44.2 billion foiled buy of Honeywell Inc. and UAL Corp.’s canceled bid for US Airways Group Inc. Those deals alone were worth $48.2 billion. The combined value of the other 22 deals canceled in July was $682.2 million, less than any other month this year. The total value of deals undone in July could have been higher. Mergerstat only gives credit to the equity portions of the deal, valuing UAL-US Airways at $4 billion. Including debt, the deal was worth $12.3 billion total, boosting the dollar value of July merger terminations even higher. Facing this unpleasant reality were investment banks Bear Stearns & Co. and J.P. Morgan Chase & Co., both of which were advising on $44 billion worth of canceled deals, due solely to the GE /Honeywell debacle. Both firms lead the list of investment banks on the canceled deals. In a distant third place was Merrill Lynch & Co., which advised on two deals worth $4.035 billion, including the UAL/US Airways bid. Richard Hall, a partner with New York law firm Cravath Swaine & Moore, said bigger deals with a lot of overlap naturally attract antitrust scrutiny. The reason: Strategic deals between big players usually mean a lot of overlap, and regulators have not been hesitant to wield their power. “I think people have been sensitive to antitrust risk for a while now,” Hall said. “It’s a consequence of the increasing number of strategic deals that attract notice.” The key difference besides size and regulatory scrutiny between the two big undone deals in July and the 22 other canceled acquisitions was that almost all of the others fell apart due to market conditions. Hall said that the reduced number of smaller deals falling apart suggests that big companies have finally learned their lessons when it comes to signing mergers. “I’m not surprised to see fewer big deals going bad,” he said. “My view earlier in the year was that there were a number of deals that were in trouble because they should never have been done, at least at the prices they were agreed to.” But the slowdown in the market has pounded many companies into submission, Hall said. “They’re more careful with what they do,” he said of how big companies manage their merger and acquisition attempts now. “They’re more convinced of the strategic merits of their deals and have more comfortable pricing.” That is in marked contrast to the trend in 2000 and earlier this year, when many companies saw their deals break up because their stock prices plummeted while their dealmakers were still ironing out regulatory and shareholder approval. Washington would like to help fix that problem on the regulatory side by pushing for faster merger reviews. This would give less time for the wild fluctuations in stock prices, which have killed many deals this year. At the American Bar Association Conference in Chicago earlier this month, Assistant Attorney General Charles James proposed that regulators could promise faster merger reviews if companies submitted the relevant documents more quickly. But Hall believes such a plan would only have a limited effect on merger terminations. Many troublesome mergers are so-called “second-request deals,” in which regulators ask for more information on possible overlaps between companies, he explained. “Even if they do those somewhat faster, they’re still going to be fairly time-consuming,” Hall said. “Mere speed is not going to make a big difference,” Hall said of regulatory merger reviews. “What would make a difference is more certainty in the outcomes of review.” Copyright (c)2001 TDD, LLC. All rights reserved.

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