Tuesday, October 12, 2010

Is Deal Making Back in a Groove?

WSJ Deal Journal, Oct. 12, 2010:
By Shira Ovide
That at least is one takeaway from the prognosticators at Standard & Poor’s.
S&P Valuation and Risk Strategies said since 1998, fourth-quarter deal volume has risen an average of nearly 15% from the prior three months. Capital IQ reported $185 billion of deals announced in the third quarter. S&P said that assuming the average historical trend for October to December, the deal volume for the fourth quarter could “reasonably exceed” $211 billion.
Already the fourth quarter has seen a string of solid, if not blockbuster, deals. GE made a $3 billion bid for energy infrastructure firm Dresser, Gymboree is slated to be bought for $1.8 billion by Bain Capital, and today Pfizer announced a $3.6 billion offer, or $14.25 a share, for King Pharmaceuticals.
At $211 billion, the fourth quarter would be the most active period for deal making this year. Of course, that could be said to be damning with faint praise, as that would be down about 11% from the fourth quarter of 2009 and well below the $447 billion of deals announced in the fourth quarter of 2006, the year with the most active fourth quarter for deals, according to S&P’s analysis of Capital IQ data.
To be sure, past performance isn’t predictive of future results. “A shock to the system could put this forecast on hold,” S&P director Richard Peterson cautioned. But please forgive battered investment houses for hoping S&P is right.

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