Last-Minute Merger Cancellation Is Far from Impossible

When two firms merge, no matter the size, they will unavoidably have many complex negotiations, corrections, meetings, and resolutions. Even after all these processes, some establishments may still cancel a merger within days of completion. The cancellations are often unusual but far from impossible. Here is a look at some of those reasons why some big corporations decided to stop a merger decision at the last minute.

Bidding Wars

There have been situations where more than one company was interested in merging with an establishment. Even after a merger is almost completed, the process can be cut short if another company presents a better offer.

This was the case when the pharmaceutical company Warner-Lambert had practically completed the merger process with American Home products for a deal of $53.8 billion when Pfizer presented a bid for $84.2 billion. With a proposal that was over 40% of the American Home Product offer, Pfizer acquired Warner-Lambert ending the previous merger process last-minute.

Opposing Views

Usually, when two companies merge, a lot of changes are required to take place. Meetings are held to decide leadership, culture, and other integration processes. Sometimes it might be challenging to reach an agreement, and such mergers can be canceled.

This was the case in the merging of Daimler and Chrysler in 1988, a lot was expected from the merger, but it just couldn’t work because of the cultural differences and style of operation of both companies. Sadly, in 2007 Daimler had to sell Chrysler and continue operations as usual.

That is also why Omnicom Group Inc. and Publicis Groupe SA had to cut short their merger last-minute when they discovered that both companies could not come to terms with how to manage the merged entity during negotiations.

Misvaluation

Sometimes, an organization may seem attractive from the outside and make other entities interested in merging with them. However, an in-depth look into the company’s structure can make the acquiring entity back out from a merger last-minute.

Bank of America discovered this too late after the consolidation with Countrywide. They became legally responsible for Countrywide’s debt and have had to pay over 40 billion USD for an institution they purchased for 4 Billion.

To avoid cases like this, whenever an acquiring company senses the company to be acquired is wrongly valued, they’d back out of the deal at the last minute to prevent future loss.

Government Regulations

Most mergers are meant to make the acquiring company more prominent and better, so it is not unheard of to make mergers that can help them pay fewer taxes or get a higher market share. Regulatory bodies sometimes get wind of it and stop it last minute.

This was the situation with AbbVie Inc. and Shire PLC. This merger was supposed to help AbbVie save on taxes by moving its headquarters to Europe. Just before the merger was completed, the United States passed new laws that would have made the merger less profitable, and it was terminated immediately.

The Halliburton and Baker Hughes merger was cut short by the department of Justice when it was discovered that both firms’ merging would concentrate on customer options and reduce innovation.

There are many other reasons and instances where mergers were stopped last minute, and the above are examples to show that they are not impossible. Blocking a merger does not come without its consequences, it can end with bad blood between both entities, and one party has to pay breakup fees that usually amount to billions of dollars.

However, in some cases, it is better to prevent joining even though last minute, to spare the company a future of loss and pain.