M&A in August plunged a whopping 64% from the prior month and so far this year, about 20% of acquirers have pulled out of existing takeovers. Some investors are betting deals for First Data (FDC) and TXU Corp. (TXU) may be the next to fall through. Typically dealmaking rebounds in September, but will things be different this year?
Frank Aquila, a partner from Sullivan Cromwell, the largest M&A firm in the world joins the panel for this conversation.
We first spoke about this in June, so how does dealmaking look to you, today ?
“When we were talking about this in June the point I was making,” says Acquila “was to focus on liquidity. Clearly, that was the issue. Interest rates are not the issue….” He adds, “In terms of deal flow, I think a lot of these deals are going to get done.”
What gives you that confidence?
“The banks understand that.. they need to get these deals done,” says Aquila. “Of course there’s always a deal that doesn’t get done.”
If a few deals don‘t happen, do the banks get hurt?
“Every bull market has had deals that didn’t work and that might happen now,” says Aquila. “But clearly there’s a great incentive for pulling together and trying to get the deals done. I don’t see that falling apart.”
What about using “material adverse change” to re-price a deal?
“It’s extraordinarily difficult to use material adverse change to get out of a deal,” says Aquila. “You really have to be willing to walk away and have a party on the other side that really wants to get the deal done.”
Pete Najarian tells the panel he likes the TXU deal and he agrees with Aquila that deals will get done.
Guy Adami says Hilton (HLT) is a buy as an M&A play.
Karen Finerman tells the panel she’s a buyer of Alcan (AL).
Jeff Macke says he’s afraid of the Tribune (TRB) deal and also recommends staying away from former takeover names such as Dillard’s (DDS) and Macy’s (M) .
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Trader disclosure: On Sept, 4, 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Najarian Owns (CREE), (HLTH), (PDE); Macke Owns (HAS), (INTC); Finerman Owns (GS), Finerman's Firm Owns (LTD), (WMT); Finerman's Firm And Finerman Own (HD); Finerman's Firm Owns S&P 500 Puts; Finerman's Firm Owns Russell 2000 Puts