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Pro Analysis

Breakingviews: Deals from latest M&A boom will disappoint in 2017

A pedestrian walks past a Zales store in New York.
Scott Eells | Bloomberg | Getty Images
A pedestrian walks past a Zales store in New York.

As the most recent merger boom winds down, the broken promises of over-eager corporate executives will begin to emerge in earnest. Contrary to the Wall Street spin, one plus one rarely amounts to more than two. The progress of three transactions from the start of the current cycle illustrates the ways investors will be let down in 2017.

Worldwide M&A reached $3.3 trillion through December 2016, according to Thomson Reuters, down 18 percent from the record-setting year that preceded it. The crop includes mega-deals like AT&T's proposed $85 billion takeover of Time Warner and Abbott Laboratories' $25 billion acquisition of St. Jude Medical.

Some matches will work out as overlapping businesses generate cost savings that fall to the bottom line. In many cases, however, the market prematurely gave CEOs the benefit of the doubt. Disasters like Time Warner-AOL or Vivendi-Universal, which followed the fin-de-siècle surge, may be avoided, but deals struck in poultry, jewelry and artificial limbs provide a sneak preview.