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ALEX BRUMMER: Barack Obama's administration drawing line in sand on merger and acquisition boom


Published: 17:00 EST, 6 April 2016 | Updated: 19:12 EST, 6 April 2016




America views itself as the exemplar of free market capitalism. But after the over-indulgence of Wall Street in the run-up to the financial crisis the Obama administration is drawing a line in the sand on a merger and acquisition boom which has seen $11trillion of deals done across the globe in the last three years.

The biggest manifestation of the backlash is the change in the rules governing shifting of tax domicile which has brought the $160bn (£113bn) Pfizer-Allergen deal to a screeching halt. British-born Pfizer boss Ian Read overdosed on the Viagra of deals and has retreated from proposed takeover of AstraZeneca and now Allergen in quick succession.

Oddly enough, the London stock market doesn’t think he is spent yet which is why the UK pharmaceutical shares bounced on hopes he will be back. Not amused: Barack Obama's administration is drawing a line in the sand on a merger and acquisition boom

The truth is that Washington has embarked on an anti-merger crusade that reaches right back into the US history of fighting back against trusts and monopolies.

Tax inversions are seen as particularly insidious, to use Obama’s word, because they deprive Uncle Sam of valuable corporate tax income. They have become possible because in the post-crisis world the Federal Reserve has sprayed cash into every corner of global finance providing the loan capacity and leverage which makes mega deals possible.

In the latest show of firmness the US Justice Department has launched a formal anti-trust case against the proposed oil services merger between Halliburton (one of companies involved in the BP spill in the Gulf of Mexico) and its nearest competitor Baker Hughes.

The DoJ cites no less than 23 markets in which the supply chain and consumers would be exposed to less competition. The deal is almost certainly dead in the water.

The Committee on Foreign Investment in the US, which looks at deals in terms of national and economic security, most recently has blocked an effort by a Chinese entity to grab 15pc of hard-disk drive maker Western Digital on the grounds that the technology is too important to be shared with Beijing.

No one is quite sure why the knockout bid by Chinese insurer Anbang’s $14bn for Starwood Hotels fell apart but the coolness in the US to overseas ownership possibly was a factor.

The toughness of the American authorities in the face of flimsily based tax avoidance deals, diminution of competition and overseas ownership must be sharply contrasted with what goes on in Britain. The weak-minded Competition and Markets Authority (CMA) nodded through the anti-competitive BT takeover of mobile operator EE without any remedies, strengthening a dominant player.




The UK positively courted China to be investors in our ‘new’ nuclear power industry despite concerns from the security services about allowing it access or even control over sensitive technologies.

And were it not for the efforts of the media the proposed Deutsche Boerse ‘merger of equals’ with the London Stock Exchange might not have been scrutinised by Parliament at all.

No one wants to stop the wheels of capitalism spinning and there are takeovers such as Tata’s absorption of Jaguar Land Rover that have been a glorious success.

But government, Parliament and independent agencies such as the CMA have a profound duty to challenge every aspect of each deal. It is pitiful that we don’t.

Instead we have allowed rotten deals such as EDF-British Energy, Lloyds-HBOS and Kraft-Cadbury to go ahead unimpeded.

Heavy pruning

Britain’s banks have little choice but to embrace the new technology that is sweeping through the financial sector.

North-east based Atom Bank has just announced regulatory lift-off for its banking app which has been ‘optimised’ – to use a terrible Americanism – for mobile use.

Barclays has become the first of the big high street beasts to form a partnership with digital currency firm Circle which uses a revolutionary blockchain system to make payments rather than using centralised middlemen such as ‘Chaps’. Circle has been granted an e-money licence to operate and the deal is being blessed by the Treasury, which says that it is a milestone for fintech.

All of this will no doubt make life so much easier millennials and online aficionados.

But of far more concern to people up and down the country, especially in more rural areas where broadband and mobile coverage is indifferent, will be the warning that the high street banks are planning to close a further 400 branches this year. HSBC, Barclays and RBS are leading the way.

The closures will hit small businesses particularly hard as well as the elderly, the infirm and the high-tech disenfranchised.

Our banks make much of the fact they are customer-focused. Hooey.

Hitting the road

Not many of us would regard a wet afternoon visiting the forecourts of Britain’s petrol stations as a great day out or a hobby.

Property tycoon Gerald Ronson has his own take. Since starting out in St Albans 50 years ago, when Harold Wilson was prime minister, he has built up a chain of 1,000 self-service petrol stations Rontec and remains as enthusiastic as ever.

‘It is a fantastic business – seven days a week, 365 days a year, the cash is pumping 24 hours a day,’ he says.

The rich are different.



After over-indulgence of Wall Street in run-up to financial crisis Obama administration








