Value of shelved M&A deals since June exceeds $150bn

Higher interest rates are making acquisition financing more expensive and harder to raise

Elon Musk’s $44bn takeover of Twitter is subject to a court battle after the billionaire tried to back out. AFP
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Takeovers are falling apart from Sydney to Switzerland, leading to a gloomy late summer for Wall Street bankers as cheap financing dries up.

More than $150 billion in mergers and acquisitions have been scrapped or stalled since the beginning of June, data compiled by Bloomberg showed. KKR on Friday confirmed a Bloomberg News report that it is abandoning a $14bn bid for Australian hospital chain Ramsay Health Care.

Swiss drug maker Novartis announced a day earlier it would spin off its $25bn generics unit after failing to draw attractive private equity bids. Merck's talks for $30bn cancer-drug maker Seagen have hit a snag over price, while Ardian is shelving a $3bn sale of Italian healthcare software provider Dedalus.

Dislocated financing markets and higher interest rates are making acquisition financing more expensive and harder to raise, said Lars Aagaard, head of Asia Pacific M&A at Barclays.

“More deals are being pulled and auction processes put on hold,” Mr Aagaard said.

“Vendors’ price expectations take some time to adjust to the new normal.”

Private equity dealmakers are struggling to get cheap credit for buyouts, as inflation and fears of an economic slowdown rock the debt markets.

Investment banks are nervous about adding more debt to the $80bn they already hold, while private lenders are pulling back on risk by cutting how much debt they are offering in a single deal.

Several transactions have been cancelled due to once-hot parts of the market falling out of favour.

In the cryptocurrency industry, Mike Novogratz’s Galaxy Digital Holdings and a lender backed by the Thai royal family both scrapped acquisitions this month.

The air has also been coming out of the market for special purpose acquisition companies.

Grooming start-up Manscaped this month terminated a $1bn deal with a blank-cheque company that was set to be backed by actor Channing Tatum. Ticketing engine SeatGeek abandoned a $1.4bn merger with a Spac backed by basketball star Kevin Durant.

Then there’s the biggest deal of them all to hit the rocks: Elon Musk’s $44bn takeover of Twitter, which is subject to a court battle after the billionaire tried to back out.

To be sure, some negotiations could be revived, particularly if market sentiment improves. Ramsay Health said on Friday it is prepared to engage with KKR to see if it can come up with another offer.

Updated: August 27, 2022, 5:00 AM
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