Given the current market environment, it is not surprising to see deal volume dip sharply with just one new deal announced last week and one completed. In fact, there have only been 7 new deals announced this month compared to 18 last month and 13 new deals in September 2021. If the Fed continues on its current course of interest rate increases, we are likely to see new deal volume dip again in Q4 2022. The silver lining is that we have seen a large number of deals close in recent weeks and many have received regulatory approvals or have successfully challenged regulators as discussed below.
The Change Healthcare (CHNG) – UnitedHealth Group Incorporated (UNH) Deal
On January 6, 2021, Optum, a part of UnitedHealth Group and Change Healthcare entered into an agreement to combine, in a transaction that called for the acquisition of Change Healthcare’s common stock for $25.75 per share in cash. The deal has been facing challenges from the Department of Justice since March 2021 and UnitedHealth decided to sweeten the deal in April 2022 by adding a $2 per share special dividend and increasing the termination fee.
We wrote the following in a SeekingAlpha article titled, “The FTC Throws A Wrench Into The Meta Machine”
Unbridled capitalism with no checks and balances is not good for consumers or society at large. Unfortunately, you could also go to the other extreme where onerous regulations and red tape stifle growth and innovation. If the Federal Trade Commission (FTC) or the Department of Justice (DOJ) decide to step in and sue to block a merger of large public companies, most companies give up and the deal falls apart. Every once in a while you end up with a situation like UnitedHealth Group’s acquisition of Change Healthcare (CHNG) where the companies decided to take their slim chances in court.