This year's largest global merger deal falls through: Seven & i refuses to negotiate, leading Canadian company to abandon acquisition, investment banks miss out on hundreds of millions in commissions

Canadian convenience store giant Alimentation Couche-Tard Inc. announced the termination of its acquisition of Japan's Seven & i Holdings Co., resulting in significant losses for international investment banks such as Goldman Sachs and Morgan Stanley. This deal, which was expected to become the largest merger and acquisition case globally in 2025, ended due to the breakdown of long-term negotiations between the two parties.

Goldman Sachs served as the financial advisor for Couche-Tard in this transaction, providing consulting services for its ¥6.77 trillion (approximately $46 billion) acquisition offer; Morgan Stanley, in conjunction with Japan's Mitsubishi UFJ Financial Group, provided consulting for Seven & i, while institutions such as Nomura Holdings were also deeply involved in the transaction.

Investment banks typically adopt a "success fee" model for compensation, meaning they only receive fees for consulting and debt financing arrangements after the transaction is completed. After nearly a year of negotiations, Couche-Tard abandoned the acquisition, citing "the other party's refusal to engage in meaningful negotiations." If completed, this would have been a historic case of foreign acquisition of a Japanese company. It is estimated that the parties involved could have shared commission revenues in the tens of millions to hundreds of millions of dollars.

Following the announcement, Seven & i's stock price plummeted 9.16% in the Tokyo market, marking the largest single-day decline in three months. The company responded by expressing "deep regret" over the acquirer's decision but emphasized its commitment to an independent operational strategy, continuing to pursue approximately ¥2 trillion in shareholder returns by the end of fiscal year 2030 through stock buybacks, introducing strategic partners, and an IPO of its North American convenience store business.

The impact of this failed transaction extends beyond the financial sector. Bloomberg Industry Research pointed out that Japan's general trading company Mitsui & Co. missed the opportunity to sell its 2% stake in Seven & i for approximately $1 billion, while a 10% stake in Seven Bank, a subsidiary of Seven & i, is planned to be sold for ¥30 billion (approximately $208 million) to Itochu Corporation, highlighting its strategic shift to focus on core convenience store operations.

According to data from the London Stock Exchange Group (LSEG), the transaction volume in Japan's M&A market reached $232 billion in the first half of 2025, more than doubling year-on-year, pushing the total M&A volume in Asia to $650 billion.

This surge is attributed to corporate governance reforms promoted by the Japanese government. In January 2025, the Ministry of Economy, Trade and Industry revised the Companies Act, requiring companies to enhance profitability and optimize shareholder participation mechanisms, while the low-interest-rate environment further stimulated the activity of foreign capital and private equity.

In the current M&A boom in Japan, companies such as Toyota (TM.US) and Nippon Telegraph and Telephone (NTT) are pushing for the privatization of their listed subsidiaries, while private equity funds are actively taking over non-core assets. Institutions like Morgan Stanley are expanding their business by establishing specialized financing departments and bringing in elite traders, while Goldman Sachs continues to strengthen its team in Japan.

Bankers analyze that government reforms and the long-term trend of Japanese companies seeking overseas growth will support the momentum of transactions in this mature market, with commission revenues being crucial for the profitability of investment banks in the Asia-Pacific region. Despite increasing global economic uncertainties making valuation negotiations more challenging, the relative stability of the Japanese market is still seen as an important direction for global capital allocation