A Cold Winter for M&A in August

WSJ DealJournal, August 31, 2007, 8:41 am

Posted by Stephen Grocer
Since June when concerns about the credit market began mounting, industry watchers have been wondering when the buyout boom would go bust.
The data is in and August may well come to mark the end of the “golden era” for M&A.
Through Aug. 30, companies and private-equity firms struck 2,496 deals world-wide valued at $193 billion, according to Dealogic. That’s a far cry from the $544 billion of deals announced in July.
The drop off can’t be blamed on a summer slowdown. Deal volume this month fell 25% from August 2006 (22% in the U.S.). It marked the lowest monthly total since July 2005 and the lowest for the month of August since 2004.
The fall off in M&A activity during the month was due in no small part to the retreat of the private-equity industry. With investors refusing to buy much LBO-backed debt, private-equity deal making slowed to a trickle. Gone were the megadeals of the first half of the year.
Buyout firms scooped up just 152 companies world-wide, valued at $15.6 billion, through Aug. 29. That’s a 35% and 70% drop, respectively, from the same period last year. In the U.S., buyout volume fell 70% to $5.3 billion. Buyout volume as a percentage of total deal volume was just 10% after accounting for more than 20% through the first seven months of the year, according to the data.
And those numbers just begin to tell the story. August saw just three leverage buyouts valued at more than $1 billion announced. The month of May saw 26, according to Dealogic.
Yet 2007 is still on pace to shatter last year’s record total – a sign of just how robust the first seven months of the year were. Volume through Aug. 30 reached $3.65 trillion, up 51% compared to the same period last year. It’s just $264 billion behind 2006’s $3.9 trillion total.