Amid the Financial Crisis of 2008/2009 the Obama administration and the Federal Reserve provided untold amounts of liquidity to financial markets. The Fed never let the economy hit rock bottom. Instead, it fought price deflation at all costs. It also lowered rates to help spike asset prices, including financial markets. The “Bernanke put” helped put a floor on the market, and spurred animal spirits among real estate developers and corporations.
Several companies grew revenue and earnings by becoming serial acquirers. Teva (TEVA) was one of those companies. Such acquisitions helped spur the company’s’ share price, at least initially. The company may have made one deal too many after it acquired Allergan’s (AGN) generic operations for $40 billion:
The drama being referred to was the abrupt switch made by Teva from pursuing and then ditching Mylan NV, a Dutch rival which had fiercely resisted its approaches, in favor of Allergan. Given the amount of money on the table — both deals were priced in excess of $40 billion — and the exceptionally rancorous and highly publicized exchanges between the bosses of Mylan and Teva, there was indeed plenty of passion and much at stake.
But perhaps the best place to start is not at the end, with the rapid consummation of a friendly deal between Teva and Allergan, nor in the middle, when Mylan spurned a similarly priced offer from Teva. The first question that needs to be answered is why Teva wanted to make a mega acquisition at all.