Thursday, June 04, 2009

Deal Activity Is Down 40% So Far This Year

From DealBook, June 4, 2009:

Mergers and acquisitions activity continues to languish this year as the fallout from the economic crisis lingers.
There have been $751.6 billion worth of deals announced so far this year, a steep 40 percent drop from the comparable period last year, according to Thomson Reuters. This decline represents the worst drop in deal activity for the period since 2001, when the recession then sent deal volumes down 52 percent from the prior year.
Regionally, European M.&A. showed the largest fall from the previous year, 48 percent, as investors balked at doing deals on the Continent. Meanwhile, the decline in deals in the United States was not quite so steep, falling 33 percent to $266 billion.
Global deal activity picked up a bit in May, with $186 billion in announced deals, up strongly from April when there was only $118 billion in announced deals.
But the majority of deals announced so far this year continued to be in the first quarter, when there were several huge deals announced involving pharmaceutical companies and government stakes in banks.
In fact, the two largest deals so far this year continue to be drug-related, with Pfizer’s $64 billion takeover bid for Wyeth and Merck’s $45 billion takeover bid for Schering-Plough.
The next two largest deals involve the British government’s taking stakes in two of Britain’s troubled banking giants, the Lloyds Banking Group at $22.3 billion and Royal Bank of Scotland at $18.6 billion.
Meanwhile, investment bankers are seeing a severe drop-off in their fees, which is sure to depress this year’s bonus pool. Global M.&A. fees for transactions completed in 2009 stand at $6.7 billion, according to Thomson Reuters estimates. That’s a 58 percent decline from a year earlier, when fees totaled $15.9 billion.
– Cyrus Sanati

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