US companies have abandoned $370 billion of large deals since President Barack Obama came into power in 2009, after regulators in his administration blocked an unprecedented number of transactions to protect competition, jobs and the US tax base.
Corporate America responded with dismay on Tuesday after the US Treasury proposed new rules that torpedoed Pfizer's takeover of Dublin-based Allergan, worth $160 billion or $190 billion including debt, in an attempt to stop the drugmaker moving its headquarters to Ireland so it could avoid billions of dollars in US taxes.
It was the latest in a series of interventions by branches of the Obama administration, which has thwarted more big-ticket mergers and acquisitions than were blocked during the Clinton and Bush eras put together, according to an FT analysis of abandoned deals worth more than $10 billion.
In 2014, AbbVie pulled the plug on its $55 billion takeover of Ireland-based Shire following a similar putative rule change by the US Treasury.
Widespread opposition
The administration has also blocked several big telecoms deals in a bid to protect competition. Comcastwithdrew its $71 billion takeover of
Time Warner Cable
last year, after the Department of Justice signalled it would try to stop the deal, which drew widespread opposition from campaigners who said it would create a broadband monopoly.
AT&T dropped its $39 billion bid for T-Mobile US in 2011 after the DoJ sued to block the deal, while Nasdaq's $11 billion attempt to take over the New York Stock Exchange was thwarted by antitrust concerns.
In contrast, the George W Bush administration blocked just one large deal – the $27 billion takeover of Hughes Electronic by EchoStar, the satellite TV group.
Two big M&A transactions were torpedoed under Bill Clinton: the $12 billion takeover of military supplier Northrop Grumman by its rival Lockheed Martin, and MCI WorldCom's $125 billion bid for Sprint, the mobile phone network.
The interventionist posture has provoked anger on Wall Street. One large life sciences investor with holdings in Pfizer, Allergan and AbbVie said the administration was building an "artificial prison for pharmaceutical companies, rather than dealing with the underlying issue" of relatively high taxes for US companies.
An investment banker said the deal highlighted how the White House had succumbed to a “leftist rhetoric” that had its roots in the aftermath of the financial crisis.
Unprecedented level
However, administration officials argue that the Obama era has coincided not only with a series of tax inversions, but also with an unprecedented level of dealmaking. They believe some sectors are in danger of becoming uncompetitive after decades of consolidation.
Debbie Feinstein, director of the Federal Trade Commission's competition bureau, told the Financial Times: "There's no question that we're going to be aggressive against conduct or mergers that are going to harm competition or consumers. That's our job and we take it very seriously and we're going to do it very carefully. We're not afraid to litigate."
– (Copyright The Financial Times Limited 2016)
