The Dark Side Of A Record $5 Trillion In Mergers: Hundreds Of Thousands Of Imminent Layoffs

Tyler Durden's picture

Yesterday afternoon, Dealogic announced the for the first time in history, global announced M&A volume in 2015 would surpass $5 trillion. This record eclipses by 9% the previous all time high of $4.6 trillion set during the previous market bubble year of 2007.

The report adds that there were 10 $50 billion M&A transactions announced in 2015 worth a combined $798.9bn. That's five deals more than the previous record high activity set in 1998, 1999, and 2014. US targeted M&A ($2.5tr) accounts for half of 2015 volume and seven of the top 10 transactions.

Breaking down by total by sector, Healthcare ($723.7bn) and Technology ($713.1bn) were the leading sectors. The biggest deals announced in 2015 were Pfizer and Allergan's pending $160bn merger, followed by Anheuser-Busch InBev's $117.4bn bid for SABMiller, two of only eight $100bn+ transactions announced on record.

Below we show the table of the Top 10 deals is below, as well as a simplified chart:


Many have debated what has unleashed this unprecedented merger frenzy, even if the answer is simple: record low costs of debt have been used by management teams not only as a source of funding for record buybacks (pushing the acquiror's stock as a merger "currency" to all time highs), but also to fund ever greater portions of the merger consideration. The result are M&A EV/EBITDA multiples in the high teens, 20s, and even 30s (or higher) as hundreds of billions of investment grade debt have been issued to fund "financial engineering", be it buybacks or M&A, just not prefunding future revenue growth via spending on CapEx.

As the following chart from BofA shows, just over the next few months there is at least half a trillion in in deals that have to be funded with investment grade debt: for the sake of these management teams, they better pray that the IG market does not suffer a comparable shut down as what happened to the junk bond market over the past two months.


Funding needs notwithstanding, the immediate result of this epic merger scramble has been a year of declining corporate revenues as well as a profit and earnings recession. The not so immediate result has been a silent layoff wave (focused initially in the energy sector) as increasingly more well-paying careers are lost and replaced with minimum wage food service and retail, often times part-time, jobs.

However, none of that accounts for the layoff shock that is about to be unleashed as hundreds of billions of M&A deals go from announced to closed over the coming months, as the "pro-forma"management (and shareholders) demand to see cost-savings and bottom line results.

Where are "results" going to come from? Why "synergies" of course, Wall Street's favorite word for mass layoffs.

To be sure nobody knows just how many workers will be fired, however in a recent white paper by the Ivey Business Journal titled "Merger Synergies Through Workforce Reductions", we read, not surprisingly, that "the greater the workforce consolidation, the more attractive the economic results. For example, with a 30-per-cent workforce reduction in Option 3, economic measures such as the payback period and annual operating savings are far more prominent than in Option 1. Most notably, with a 30-per-cent versus a 10-per-cent staff reduction, the EBITDA margin improves by 500 basis points."

Taking another look at the top 10 M&A deals of 2015, we can quickly calculate that at just these 10 combined companies, the number of pre-synergy workers will be a massive 1.14 million employees. We used pre-synergies because over the coming year, the full extent of the layoffs synergies, will be revealed. Taking the conservative estimate from the Ivey "synergy" paper and extrapolating "only" of total employees will be laid off as management teams scramble to boost payback periods and operational savings, this means that between these 10 companies alone, there will be over 110,000 soon to be laid off workers.


These are 110,000 (or more) well-paying jobs, which in the current economy will not be easily duplicated and which will leads to even more minimum wage "job gain" in the coming year.

Putting this in perspective, this accounts for only ten of the deals, amounting for a little over 10% of the total M&A deal volume of 2015.

There is a silver lining: for every million in lost jobs, Wall Street bankers will make about a billion in M&A fees, which after all is what really matters.

Finally, perhaps cementing the irony of all of the above, is a forecast we made several weeks ago when looking at the 5th largest deal on the list above: the merger of Dow Chemical and DuPont. This is what we said:

Moments ago 10% of our prediction was validated with the following news:

DuPont Co. plans to cut 1,700 jobs in its home state of Delaware as the agriculture-and-chemical giant pursues $700 million in cost savings ahead of its planned merger with Dow Chemical Co.


In a letter to DuPont staff on Tuesday, Chief Executive Ed Breen also sought to soften the holiday blow, announcing that Wilmington, its hometown of 213 years, will be the headquarters of one of three planned spinoffs following the Dow tie-up.


The layoffs, which represent nearly a quarter of DuPont's roughly 7,000 employees in Delaware, come as DuPont consolidates some of its scientific research operations and moves corporate functions to other locations that are closer to its customers, Mr. Breen said.


“The effect in Delaware will be significant, reflecting the urgent need to restructure our cost base and, as part of that effort, reduce our corporate overhead costs so that we can remain competitive,” he wrote. Delaware state law required DuPont to file a notice of the layoff plans by Dec. 31, forcing the company to outline it publicly before all affected individual employees were told the news, Mr. Breen wrote.

At least the company was kind enough to wait until after Christmas before handing out the first of many rounds of pink slips.

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Yes We Can. But Lets Not.'s picture

getting laid off is a good thing... severance package and a fresh start

City_Of_Champyinz's picture

Ya, until you realize that you are overqualified/over compensated for every other open position and you will most likely make less money if you can even find a job...

rapetrain's picture

You must make up the experience that is sought after. Elementary. Don't think you deserve cookies for telling the truth. This is the real world. Lie, cheat, steal.

barroter's picture

Yes! Sing praises about capitalism as you clean out your desk.

katchum's picture

And that's why consultants have the advantage.

Seasmoke's picture

Synergy. I always would crack up when someone would use that word in any correspondence with me. It's such a 2005 word. 

fiftybagger's picture

Stakeholders.  I swear if I hear someone say that I'm going to punch them in the face.

rapetrain's picture

"Value-added synergies to enhance shareholder value, leveraging our fully-integrated platform"

MoHillbilly's picture
MoHillbilly (not verified) fiftybagger Dec 29, 2015 2:46 PM

You are just mad because you don't have any " skin in the game "

Implied Violins's picture

On the contrary: if they are wooden, I'm sending them in Soros' direction.

youngman's picture

Pretty soon we are just going to be one big Amazon...and they will sell it all...

css1971's picture

Lots of infrastructure that will go unused in a down turn. Just watch.

DipshitMiddleClassWhiteKid's picture

ive worked at some big companies (some F500, some not) and I can say that even though things are 'lean' ...they are overstaffed and full of people doing do-nothing jobs that have no impact on P&L

If you found 500 VBA/Excel programmers and worked your way up the F500 list, lots and lots of people would be out of work due to automation from removing redundent processes and people doing nonsense work. 



Falling Down's picture




I saw it in the armed forces 20 years ago, and have had similar experiences to yours in corporate America. Lots of overhead, redundant BS, retards with a hyper-inflated sense of self, etc.

ZIRP and a general malaise within various industries will drive such wasteful practices.

Lucky Leprachaun's picture

Problem is these people are often the last to be let go. Anything long-term like R&D is the first casualty these days.

youngman's picture

There is a guy down here..says he is an international business consultant......he makes pretty books with graphs that you look at for 5 minutes and then file away in some cabinet...forever...but they are a CYA for many companies....the defination of a consultant is a guy who knows how to have sex 100 differnt ways..but does not have a girlfriend...

SmedleyButlersGhost's picture

To paraphrase Brendan Behan
Consultants are like eunuchs in a harem, they know how it's done, they see it done every day, but they are unable to do it themselves.

Somewhat Evolved Monkey's picture
Somewhat Evolved Monkey (not verified) SmedleyButlersGhost Dec 29, 2015 3:26 PM

House of Lies I thought did a pretty good job portraying life in the consulting world.

NotApplicable's picture

I'm going to go out on a limb here and predict that Yellen Capital LLC will keep the IG wheels greased.

Meanwhile, Uncle Sugar will loan Delaware et al. lots more cash for UE benefits.

Bill of Rights's picture
Switzerland to vote on banning banks from creating money


Seven years after the financial crisis struck, the Swiss federal government confirmed on Christmas Eve that it would ask its people whether the central bank – the SNB – should be the sole institution to be able to create money in its financial system. No date has been set for the referendum yet.

The Swiss Sovereign Money campaign is leading the initiative and aims to curtail financial speculation, demanding that commercial banks hold 100 per cent reserves against their deposits. This issue will have to go to a referendum under Swiss law now that the petition has gained more than 100,000 signatures within 18 months of launching.

edifice's picture

Probably has to do with the "Swiss Surprise" that happened back in January, where SNB cut deposit rates and abandoned the Euro floor. EUR/CHF had like an 1800 pip move down in 1 day.

wombats's picture

It willfail even fasterthan their vote to go back to the gold standard a year or 2 ago.  No way TPTB allow this one to pass. 

Sudden Debt's picture

In any merger, and I've survived a few, the bigger the party, the bigger the bloodbath.

The people will be notified after that fabulous christmas party!

MeBizarro's picture

That was the old model when companies at leat paid lip service to not making layoffs until right after the Holidays.  Breen made massive layoffs the 2 weeks before Christmas at DuPont. 

It just isn't marketing/IT/finance folks either. They laid off whole R&D departments including my friend's wife who is a Ph.D. in chemistry from Stanford. She is probably one of the 10 smartest people on the planet in her field. Irony is she is Chinese and they are outsourcing her job to China.  She has no interest in relocating with her husband to China even if they offered her a old job either.  Figures it would be at least a 50-60% pay cut. 

Basically what is starting to play out is the highly-educated, white-collar jobs that aren't protected through various means are starting to experience to what has happened to wholesale portions of the blue-collar, white male population the last 30 years. 

You better in the future either own assets that produce income (mine is a shitload of rental units) or have a ocntignecy plan because working for corporate America once you are past 45 is a dead end unless yoj make it to the very top. 


It's easier to work against Corporate America than it is to work with it IMHO. I have been working against Corporate America since March 10th 2008, and it is paying off in terms of personal satisfaction. When the whole system implodes I will move into my new Monster House that Corporate America vacates in their mad dash to survive the mass uprising that will topple the entire lot of Corporatists no matter where they seek to hide. Sooner or later I will control all of their infrastructure in North America.

barroter's picture

One guy I knew, who was very loyal to his corp, was a fixer who was sent in to correct other's incompetence. The guy had talent and managed to turn around the sick portions of the company.  For a reward, he was fired, then allowed to be rehired if he took a 30% cut in pay. Also, his compensation if succesful, was reduced to .3% of the profits of the newly formed business and sales he managed to generate.

He quit.  He was sick of the "slashing your own arteries" culture for the sake of the company.  Loyalty? Easy, be loyal to yourself...fuck the company.

hongdo's picture

Christmas parties were banned a long time ago.

MeBizarro's picture

No they weren't.  They just became 'Holiday Parties and when you have a diverse workforce that is the smart thing to do.

I can't stand the 'War on Christmas' pukes.  They should protest some of the retail stores that were open on Christmas instead of ranting mindlessly about 'War on Christmas.'  Just par for the course for these folks and their massive and morallly bankrupt hypocrisy. 

Ajax_USB_Port_Repair_Service_'s picture

At our firm, the ‘Christmas Party’ has morphed into the ‘Winter Solstice Party‘.

Phoenix Pilgrim's picture

At our firm, the Christmas party was replaced with a "Western Luncheon" and we were required to wear cowboy hats and jeans. Can't make this stuff up.

Lucky Leprachaun's picture

If the diverse workforce doesn't like American traditions they're free to return to whatever hell-hole they fled from.

conraddobler's picture

Big business does NOT CREATE JOBS!

They were created when the business was SMALLER AND GROWING.

The job growth comes from small businesses which large businesses hate if they can't buy them they are more than just annoying they are future problematic competition that sets the service bar higher so they enjoy killng them off and absorbing them.

This however is NOT good for average people in any way.

daveO's picture

Right. Big business is an extension of the FED. They acquire growing companies, using fraudulent fiat, to strip mine the assets for the Wall Street/London investor class. 

Jack Burton's picture

Free Fed money = stock buybacks, mergers. Neither is proven to be a growth generator. In fact, global finance capital is now really bad at growth. Speculation instead of price discovery. Stock price manipulation instead of company growth prospects. It's all a game where the Fed provides the elite with free money to play.

People are fond of asking "Who is this so called elite?" I would say if you can borrow money for ZIRP in the billions, you are an elite.

BSHJ's picture

Does unemployment income still last for several years?

corporatewhore's picture

no because we've recovered from the "Great Recession" /sarc

It may vary from state to state 

Phoenix Pilgrim's picture

The big surprise for the older laid off folks (~55) is that you are not eligible for unemployment and never counted as unemployed if you had any kind of pension promise -  .gov catagorizes you as "retired" and tells you to go collect your pension which was just sliced by 30-50% with the "early retirement penalty".

Ajax_USB_Port_Repair_Service_'s picture

Don't know about 2 years. Used to be.

Here's some stats for Illinois:

Notice the duration is longer now than in 2000 or 2007. Great recovery!

Make_Mine_A_Double's picture

I half expected my office would get the chop before Christmas - that's when the bastards like to do it. So your out by the new year and they get a clean sheet of paper.

We survived the cut apparently, but you just don't know from one day to the next. My office has been solidly profitable for years, but it's all 'what can you do for me tomorrow' now.

And even in this enviroment we have a bunch of deadwood VPs in the Ministry of Golf (as I fondly refer to it) trying to look busy.

I honest to God don't know what young people are going to do 20 years from now.


Atticus Finch's picture

20 years??? Right now, they are living in their parents' basement.

barroter's picture

'what can you do for me tomorrow' Yep...that's common.

What can I do for you? How about sending those hard drives I have from ur office to the Attorney General?

At our place, we have "VP's of Looking Out the Windows"

Lucky Leprachaun's picture

'what can you do for me tomorrow?' 

Yes, have come across that many a time.  All prior contributions count for nothing.

MeBizarro's picture

DuPont cuts are going to be so dramtatic and have such an impact that the serious Delaware legislators are already planning for a meaningfulwhole in state revenues in '16 and '17.  Maybe they can take some legal steps to expand the burgeoning drug money laundering racket in Delaware.  Already a small cottage industry of lawyers, advisors, accountants, and bankers who help legally set up all kinds of money laundering from foreign nationals and others.

Why go to the Caymans or a host of other places increasingly under scrutiny from the IRS and other national governments in Europe when you can legally launder money through US financial institutions along with the stability that comes with it 

Ralph Spoilsport's picture

DuPont has been rapidly decaying since the Bronfman brothers. Delaware saw the light early on and sold out to credit card issuing banks. Other states took a lot of that business away by being even more corrupt than the "First State". Wilmington Trust, Delaware Trust, MBNA and many others are all gone now.

They re-routed major highways and roads around Wilmington to entice Astra-Zeneca to build a large corporate center north of Wilmington off of 202. They left them in the lurch shortly after and moved on to a better deal. Public sentiment around Wilmington is hard to determine because they only have a ratty Gannett clipping service for a newspaper along with their horrible website. The radio stations have almost no local content if you can even pick them up as their power levels have been cut.

Visiting friends around the area this Christmas season was depressing as hell because people have had the crap kicked out of them and there's no light at the end of the tunnel. The whole area is starting to look like Detroit with empty strip malls and decaying cookie cutter housing developments that have seen better days. Wilmington is no longer a "Place to be Somebody" even though those signs on the major thoroughfares proclaiming this are still there, with faded peeling paint and grown over with weeds.

TheDanimal's picture

Alright people, here's how totalitarian dystopia will unfold (and already has begun in earnest).  So people will get laid off, then get shitty McJobs once unemployment runs out, then they'll get worn down, maybe start drinkin' too much or try a drug they shouldn't have.  Then, one way or another, they'll be hearded into probably the most insidious racket this country's got, the mental "health" industry.  Then they've got you by the balls, they've got your innermost thoughts that you stupidly told one of the officials.  They'll hit you with many different people who will play good cop, bad cop with you.  They exist to extract incriminating information from you.  This also employs lots of folks as social workers, but what you must realize is that these people are social engineers.  They must not be trusted, but many people are too weak-minded and fall for it hook, line, and sinker.  Your records, including things you've said, especially incriminating things will then be stored in a centralized database and who knows who can get at it then?  Who knows what rights you will be denied in the future for your thought crimes today?  TPTB just want to shuffle everyone around from bullshit thing that adds no value to bullshit thing that adds no value.  Either they're control freaks, or they've been up to such serious shit they can't handle us having any free time to potentially discover it. 

They'll ruin the economy to get you and almost everyone else onto government welfare programs, then the establishment Republicans will step in and want to add tons of requirements to said programs, because "fuck those freeloaders, they should just work harder and become rich".  But what happens to that line of thinking once the masses cannot be decieved into believing the myth of upward mobility in America?  Once everyone realizes that we don't have capitalism anymore, we just have some sort of corrupt, frankenstein monster of socialism mashed with enough capitalistic elements that most people don't question it too much when folks say we have a free market economy.  By then it will probably be too late.

Long story short, we are fucked, at least I'm way more prepared now than I was before.

Make_Mine_A_Double's picture

They are already doing this to vets and certain civilians (esp. white middle class males).

If you have had checked the box for PTSD the gover vampire has you by the balls - no firearms and your perscription drugs are monitored. Likewise with 'domestic violence' wrap they have fucked coming and going.

SgtShaftoe's picture

The same M&A fury occured prior to the Weimar hyperinflation and in many countries about to go into a hyperinflationary spiral.  It doesn't last in the long-term and actually results in destruction of industry.  It will likely be 20 years or more before a positive economic climate could be found in the US again and that's assuming good policies are implemented after the reset. 

MeBizarro's picture

The only way you would stop this is a strong and active FTC and DOJ but isn't in the cards.  US really hasn't been strong on anti-competitive activity since the 90s and even then they look a much more friendly stance than their EU counterparts. 

EU has plenty of its own issues but they at least given some token credibility to not letting companies form oligopolies or duopolies.  That is gone in the US.

Hell the House GOP clowns won't even permit country of origin labels on meat and seafood products and refuse to enable to allow GMO labeling too.