The one potential benefit to the M&A slowdown? Helping the environment…a little.

It might be a stretch, but finding even the tiniest bright spot to the weak M&A environment may help soothe the pain felt as global dealmaking dropped 30 percent in the first half of the year.

With M&A volume down, and banks tightening the rein on expenses, most of the focus has been the havoc wreaked on banks’ bottom lines and the potential impact on year-end bonuses.

One study, however, found that the M&A slowdown is actually good for the environment.

How so? A study commissioned by Merrill DataSite, which provides password-protected websites that can store documents used for due diligence, said M&A advisers jetting around Europe to work on cross-border deals emitted 98,000 tons of carbon dioxide over the past year. (How does one measure that?)

The study also says the bankers used more than 112 million pages of A4 paper (There must have been a pretty scientific way of measuring that, too). An average cross-border deal apparently involves five international flights per individual and 20,000 pages of paper. Who knew?
 
And why did Merrill DataSite commision such a study? Well, the company says it is enjoying a booming business as companies seek to cut costs. 

So, the study concludes, as bankers travel less now, less carbon-dioxide gets emitted and less paper gets used. Bankers may not be happy, but Mother Nature is.

Banks battered by the credit crisis may look cheap, but so far neighbors have mostly resisted the temptation to gobble up neighbors, thanks in no small part to an accounting peculiarity that threatens to turn a target’s balance sheet into a ticking time bomb set to explode on purchase.

Under U.S. accounting rules, if a company acquires another, it must record the value of the target’s assets and liabilities at their market value at the time of purchase. For banks acquiring banks now, that is a problem. The purchase could end up cutting into the acquirer’s capital.

But Jamie Dimon is not going to let one thorny accounting issue hold him back.

The JPMorgan chief, fresh from digesting Bear Stearns, said at a conference call after announcing higher-than-expected quarterly profits that he expects the current crisis to lead to more mergers in the banking sector over time.

And although purchase accounting makes doing a deal difficult, he seems poised to do one when he sees one.

“I think the mark-to-market accounting makes it harder for a bank to buy a bank because you have to basically write the loans to a market value,” Dimon said. “But it does not make it impossible. Certainly not for us.”

His finance chief, Mike Cavanagh, echoed the sentiment.

“We wouldn’t do a deal or not do a deal based on pure accounting…we would do or not do a deal based on how much value we thought it adds to shareholders,” Cavanagh said. “Just makes it harder, that’s all.”

(Photo credit: Reuters)

Shares of Barr Pharmaceuticals Inc surged more than 22 percent on Thursday on media reports that long-rumored talks with Teva Pharmaceutical Industries might finally lead to a deal.

TheMarker and Globes financial newspapers reported that Israel-based Teva, the world’s biggest maker of generic drugs, was in talks to buy New Jersey-based Barr, marking further consolidation in the generic drugs industry. A deal could be in the range of $7 billion to $7.5 billion, the media reports said. The companies declined to comment.

The deal would boost Teva’s market share in the United States, where it wants to expand its presence, and give it a formidable franchise in oral contraceptives.

Goldman Sachs analysts questioned the timing and need for Teva to make such a move:
“Our initial reaction from a Teva perspective (assuming credence behind the report) would be surprise on both timing and target. At the risk of getting ahead of ourselves given the lack of any corporate commentary, a combination here would bring attractive product and geography additions to Teva but it doesn’t initially strike us as a need to own asset…a deal here would also add significantly to Teva’s US exposure (albeit without meaningful product overlap) where we see slowing growth in the next 3-5 years relative to international markets.”

Still, Teva has the ability to easily finance a deal, Bank of America Securities analysts said. The company has a net debt of about $1.7 billion, but is expected to generate $2 billion in free cash flow in 2008, analysts said. With financing tough to come by for most mergers lately, Teva actually appears to be well-positioned if it moved ahead with a deal.

Plus, Teva could get Barr for a decent price. Before news of a possible deal triggered a jump in Barr’s stock price, the company had been trading at 14-times 2009 earnings forecasts, which was below their historical range, Bank of America said. Over the past 10 years, Barr’s price-to-earnings multiple has averaged 17-times, analysts said.

Shares of Barr hit a midday high of $58.33 and traded at $57.40, up 22 percent in afternoon trading on the New York Stock Exchange. Teva shed 2.1 percent on Nasdaq.

With speculation for a deal already raising Barr’s stock price, the question remains what type of premium could be paid for a deal that runs the risk of some antitrust scrutiny, competitive pricing pressure in the generic drug market, and exposure to the weak U.S. market?

(PHOTO: Barr Pharmaceuticals Inc website)