What's going on?

Two big potential merger/acquisition deals fell through on Thursday � it�s a reminder that some corporate marriages just aren�t meant to be!

What does this mean?

One of the deals that fell apart was between PPG, a massive American chemicals company, and one of its European competitors, Akzo Nobel. Since March, PPG has repeatedly made bids to buy its rival (each time for a higher price), all of which were, essentially, rejected by Akzo�s board of directors. The board argued that it can create the most value for its shareholders if Akzo goes it alone (although some suspect that politics might have had a role to play � see below).


The other deal was a merger between OneWeb, a US satellite technology startup, and an older satellites manufacturer called Intelsat. That deal, which was backed by Japanese telecom giant SoftBank, required the support of investors that had lent Intelsat money (i.e. its bondholders), but they were unwilling to support the deal.

Why should I care?

The bigger picture: M&A deals can have political barriers.

Akzo is a historic Dutch company; the prospect of it being taken over by an American company was not exactly music to the ears of the Dutch political establishment. Usually, politicians don�t publically state their opposition to a takeover merely because of the acquiring company�s nationality, but it does seem that its government�s likely opposition was part of Akzo�s decision to reject PPG�s takeover bid.

For markets: Akzo has a responsibility to its shareholders to show that it can be successful on its own.

In many countries, shareholders can effectively force management to agree to a takeover; but that�s not the case in the Netherlands. Since Akzo�s shareholders have missed out on the payout of PPG�s takeover, they are likely to be even more eager than usual to see results from management (such as generating higher profits). That could be difficult: many chemicals companies such as Akzo have undergone big mergers or acquisitions in order to build up their scale and generate cost savings as well as other synergies.