Yet another merger has collapsed as a federal judge blocked Staples's planned deal with Office Depot, citing antitrust concerns. Mark Shafir, co-head of mergers and acquisitions at Citi, says the latest failed transaction and regulatory scrutiny are giving clients pause.
"You can't ignore what's going on out in the real world," Shafir told CNBC's "Squawk on the Street" on Wednesday. "It has to impact the way people think about transactions because when these deals break, you've got a damaged goods problem."
M&A is cooling off after a record-breaking $5 trillion in activity last year. According to Dealogic, deals are down more than 20 percent this year, with $481 billion in previously announced transactions called off.
"Some deals that may have been a little more aggressive in their approach are getting pushed back," Shafir said. "I don't think this is just an antitrust phenomenon."
Antitrust regulations are one cause for client hesitation, Shafir said, but so is a recent curb on inversions. The Treasury Department proposed new rules on tax inversions in April, halting a proposed deal in its wake. U.S. drugmaker Pfizer terminated a $160 billion deal to acquire Allergan after the Treasury's proposal and scrutiny from the Obama administration. The acquisition would have slashed Pfizer's tax bill by domiciling in Ireland, where Allergan is located.
"I do think if you're looking at a transaction that's very close to the edge, you've got to think twice," Shafir said.