Few business transactions have more at stake than a merger or acquisition. In these situations, there are two companies with a lot to gain or lose, so it is crucial that these deals are considered carefully, negotiated thoughtfully and reported properly. Failure to do any of these things could jeopardize the deal.
When a potential merger fails, either because of decisions by the businesses or decisions by government agencies, there can be a steep price to pay. For instance, recently, Aetna decided to pay Human $1 billion after a U.S. District Court Judge denied their proposed merger.
The payment was in lieu of an appeal, which Aetna could have filed in response to the denial. Many companies often pursue an appeal to challenge similar rulings. However, according to this report in Forbes, Aetna decided it would rather pay the $1 billion "breakup fee" than continue pursuing the merger.
The federal judge who made the ruling announced that the decision was based on the impression that a merger between Aetna and Humana, which would have been a $34 billion transaction, was not in the best interests of consumers because the resulting company would have too much power in the market.
An Aetna CEO stated that the company simply decided to cut its losses and focus on moving forward rather than trying to fight against the denial, calling the current environment "too challenging."
While most proposed mergers do receive federal approval, there are situations when they do not. This can be extremely frustrating and disappointing to both companies, who will then need to make the decision on whether to file an appeal or abort the transaction. However, hopefully, you will have already considered this possibility and discussed what you are going to do.
Discussing these possibilities and your priorities with an attorney from the beginning of any merger or acquisition can be crucial. Doing so can allow you to examine your options and make decisions that are in the best interests of your company at every stage of these complex business transactions.