By Katie Benner

Mergers and acquisitions were once as simple as a Hollywood romance. But bad capital markets, the threat of recession, and the horrible morning-after realization that you’re paying too much have made it harder for deals to live happily ever after.

The latest in the list of unions-not-consummated: hedge funds Fortress Investment (FIG) and Centerbridge partners are scrapping their $6.1 billion agreement to take Penn National Gaming (PENN) private.

Even though Fortress chief executive Wesley Edens said in March that the buyout firms “are committed to funding that transaction,” they’ve changed their minds, likely in a fit of buyers’ remorse. According to a company statement, casino and racetrack operator Penn will receive $225 million to terminate the takeover. The hedge firms agreed a year ago to buy Penn for $67 a share and Penn is trading 57 percent below that purchase price. Penn says “a re-negotiated, reduced purchase price was not a viable option.”

In a little twist, the hedge funds have agreed to loan Penn $1.25 billion over seven years. Penn can either repay the loan in cash or stock. If Penn can’t repay the loan, the hedge funds in the end will still have a lot of control over the company.

Another day, another sign of weakness in consumer spending. Tiffany (TIF) said Friday morning that December sales in established U.S. stores fell 2 percent from a year ago, despite a 10 percent sales surge at the company’s flagship Fifth Avenue store that was driven by euro-toting tourists.

The news won’t come as a shock to investors, who have driven Tiffany shares down near their 52-week low as other retailers have been showing distress signs. Even so, coming on top of Thursday afternoon’s soft profit numbers from high-end card company American Express (AXP), the Tiffany report offers another timely warning sign about the financial health of the U.S. consumer.  “We believe a recent pullback in U.S. spending likely reflected a more cautious attitude among customers about the near-term direction of the economy and related factors,” Tiffany said. The company also said it is “further analyzing our sales and earnings growth objectives for 2008″ - suggesting it may rein in its plans in March when it shares its outlook with Wall Street.