The end of 2008 saw a wave of transactions fall apart as shifting valuations and sclerotic debt markets undermined companies’ ability to close deals, a report by mergermarket says.
The end of 2008 saw a wave of transactions fall apart as shifting valuations and sclerotic debt markets undermined companies’ ability to close deals, a report by mergermarket says.
The report, entitled Global M&A Round-up Year End 2008, states that with a total of USD513bn worth of lapsed deals in 2008, the fourth quarter proved to be the hardest of all for dealmakers with 62 per cent of the total lapsed value occurring in this quarter at USD320bn.
Blue chip chemicals giant Dow Chemical’s struggle to salvage its USD 18.2bn takeover of Rohm and Haas underlines just how hard it is for companies to get the funding needed for bold strategic moves, the report says.
In the private equity industry, the value of global LBOs virtually crawled to a halt in 2008. The trend accelerated in the fourth quarter with the value of announced LBOs down 85 per cent, leaving governments to become the principle deal-makers of the era.
The report says that if the US government bailouts and rescue packages are counted as pure M&A transactions, they would have made up virtually all the biggest new deals announced in North America in quarter four 2008.
Three of the largest deals of 2008 came in the form of government bailouts and if state-backed companies are included, half of the ten largest deals, representing about one-third of their deal value, involved government-backed entities.
However, this surge in regulatory-related M&A activity failed to compensate for the overall decline in activity levels, with global M&A down 31 per cent by value and 21 per cent by volume.
North America saw the biggest overall decline of 44per cent by value, while the Asia Pacific region saw the smallest decline at five per cent.
The report found that financial services was busiest sector by value (25 per cent), followed by energy, mining and utilities. Industrials and chemicals continues to be the most active sector.
In the fourth quarter, M&A volumes in North America virtually halved compared to the previous quarter. The final quarter in North America only made up 15 per cent of total activity in the region, with values suffering a similar dramatic dip from USD302bn in quarter three to USD100bn.
Europe suffered a dip of 34 per cent in deal volumes compared to the previous quarter, whereas the Asia-Pacific region experienced a 37 per cent increase quarter on quarter – although even here deal volumes were down.
In terms of the league table rankings, Goldman Sachs and Morgan Stanley were knocked off their perch as the kingpins of global M&A.
While Goldman did manage to hold onto its positions at the top in the US, it was replaced by JP Morgan on the top of the global value tables, while UBS proved to be the most active firm, racking up 271 deals for the year, according to the report.
KPMG took second place by volume with 265 deals, while JP Morgan is ranked in third place with 260 deals in 2008.
Citigroup managed to climb one spot to third behind Goldman in the value tables, knocking Merrill Lynch down into fourth in the process.
In the Mid-Market arena, Rothschild and KPMG maintained their top spots in the global and European value and volume tables respectively.
