Things are a bit perilous in the mega-merger space right now.
On Wednesday, pharma giants Pfizer and Allergan announced they were scrapping their $160 billion merger following the US Treasury’s decision to tighten the rules around tax inversions.
Then the Justice Department announced it was suing to block the oilfield services company Halliburton from its ~$25 billion deal to buy rival Baker Hughes.
Both deals were announced last year, a record year for mergers and acquisitions activity with announcements topping $5 trillion.
Their unravelling follows a weak quarter for takeover activity. Market volatility through the first quarter led to a 20% decline in activity versus the same period a year earlier.
Now that regulators are seeking to block mega-deals for tax and anti-trust reasons, the market is starting to raise questions about the M&A space.
Shares in most of the publicly-traded boutique advisory firms have plummeted this week — a strong indication of how the market feels about the M&A space.
Boutique shops are much more exposed to the health of the M&A market, unlike larger firms like Goldman Sachs or JPMorgan, which have a number of revenue sources.
The boutiques Centerview Partners, Guggenheim, and Moelis were all advisers to Pfizer on the Allergan deal, for example.
With that deal called off, those firms, plus co-adviser Goldman Sachs, will miss out on some $94 million in fees.
Here’s how boutique banks’ shares were doing around midday on Wednesday:
- Moelis & Co.: -3.7% over the past 5 days
- Evercore Partners: -4.8% over the past 5 days
- PJT Partners: -4.9% over the past 5 days
- Lazard: -4.8% over the past 5 days
- Greenhill & Co.: -11.8% over the past 5 days