The Dow Jones Industrials (^DJI -0.98%) was down just four points as of 12:30 p.m. EDT Friday. Even after two days of sharp declines, investors aren't willing to dive in to buy the dips as they have in the past. As some investors focus on the latest disclosure reports of purchases by institutional investors, others have noticed some of the difficulties that Dow components Pfizer (PFE -3.85%) and General Electric (GE 1.30%) are having in trying to acquire companies based in Europe. The question both companies must answer is whether a different M&A mindset on the other side of the Atlantic will thwart their growth plans.
Pfizer, which rose 1.3% by lunchtime, has faced scrutiny from a number of foreign governments in its $100-plus billion takeover bid for British pharma peer AstraZeneca. Reassurances from Pfizer regarding the impact on jobs and investment in the U.K. has largely appeased British Prime Minister David Cameron and makes U.K. approval of a possible takeover appear much more likely. Yet more recently, Swedish government ministers have called for a possible rejection of Pfizer's takeover bid, citing potential damage to the Scandinavian nation's life-science and research industry and a potential loss of jobs. Despite being based in the U.K., AstraZeneca has some roots in Sweden, and the fact that Pfizer has said part of the cost savings involved in a merger would come from reduced research budgets could have an impact on the country. The move has even raised speculation that Sweden might align itself more closely with countries that take a more aggressive position in limiting M&A activity.
Source: General Electric.
General Electric was close to unchanged, but it too has struggled in Europe, as its buyout plans for the energy business of French conglomerate Alstom have come under fire from the French government. Earlier this week, France broadened its power to prevent takeovers in so-called strategic industries, giving itself the ability to intervene in this situation and forcing General Electric to take more steps to try to allay French concerns. With the possibility that a competing bid from one of GE's rivals might be in the offing, General Electric has no assurances that it can close on what would be a strong shot in the arm for the conglomerate's attempts to widen its geographical reach in its key energy segment.
With mergers and acquisitions playing such an important role in the stock market's gains lately, efforts by European governments to clamp down on mergers seem unwelcome. For investors who follow the Dow Jones Industrials -- and especially for shareholders of General Electric and Pfizer -- obstacles to lucrative acquisitions could prove costly in the long run.
