Would-be dealmakers warn of M&A, IPO delays due to shutdown

Dealmakers are starting to feel pain from the partial U.S. government shutdown that began Dec. 22.

With multiple regulatory agencies—including the Securities and Exchange Commission—down to a skeleton staff, companies are telling investors that their pending takeovers and stock sales could be delayed.

A prolonged shutdown could muddle Eli Lilly and Co.’s plan to unload its stake in Elanco Animal Health Inc., the unit it spun off last year, Lilly CEO Dave Ricks said in an interview Tuesday.

“We have said this year we are going to take the second step and sell the 81 percent that we currently hold,” Ricks said. “We need the SEC to open to do that. That’s a problem.”

The impasse in Washington, D.C., could be dire for initial public offerings this quarter, according to another industry expert.

“People typically go out in early January with IPOs because if you price after Feb. 14, you need your audit for 2018,” said David Goldschmidt, global head of capital markets at Skadden Arps Slate Meagher & Flom LLP. “The window to price by Feb. 14 is closing and if people aren’t able to do their deals by then, there’s a chance we could lose a good part of the first quarter for IPOs.”

Even if the Trump administration reaches a deal with Congress to end the shutdown soon, pending IPOs face continuing delays. That could include highly anticipated listings by Lyft Inc., which announced in December that it had filed confidentially for an IPO, and Uber Technologies Inc., which also filed confidentially last month according to a person familiar with the matter.

“Another couple of weeks and you’ll have serious IPO delays,” said Carter Mack, the president and co-founder of JMP Group LLC. “Even if the shutdown ends and the SEC gets back to work, there’s going to be a backlog of deals filed in the interim that haven’t been assigned to examiners.”

Companies had been waiting to see whether 2019 would start with a market rebound, Mack said.

“Normally you’d see companies taking advantage now, but they’re not,” he said.

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