Global M&A values are down 30 per cent from Q1 2008, while volume is down 54 per cent, according to research from mergermarket.
Global M&A values are down 30 per cent from Q1 2008, while volume is down 54 per cent, according to research from mergermarket.
M&A in the healthcare sector has provided investment banks with one of the few opportunities to earn fee income in the first quarter of 2009. By being retained to advise on the largest deals in 2009 – all in the healthcare sector – Goldman Sachs, JPMorgan and Morgan Stanley reaffirmed their dominance at the top of mergermarket’s global M&A league tables when ranked according to value.
In the case of Morgan Stanley, which has overtaken JPMorgan by value at the end of the first quarter, the firm has succeeded in reversing a major slump in 2008, when it sank to seventh (by value) and 11th (by volume) globally.
With the credit crisis taking its toll on the positions of global investment banks like Lehman, Citigroup and Merrill Lynch, M&A boutiques such as Greenhill and Evercore Partners have catapulted themselves into the top ranks. Similarly, those banks which took advantage of the credit crisis to expand their franchise, such as Barclays (up from 29th to seventh in the global tables by value) and Nomura (up from 24th place to second in the Asian league tables), have also made progress.
In addition to being largely focused on the healthcare sector, much of the M&A activity involved US companies (49 per cent by value compared to 31 per cent for 2008). Asian activity levels are particularly low by comparison, with China’s recent decision to block Coke’s acquisition of a mid-sized Chinese juice company on anti-trust grounds likely to ensure that this does not change.
‘Looking forward, US M&A looks set to continue to dominate,’ the report says. ‘The technology sector, with large deals in the pipeline including that involving IBM and Sun Microsystems, is expected to follow healthcare as the next happy hunting ground. In both healthcare and technology the most appealing targets are based in the US. However, it remains to be seen whether overseas acquirers will have what it takes to step up and act as consolidators in what is widely viewed as a once-in-a-lifetime opportunity to acquire cheap targets.’
On a regional basis, European M&A in Q1 2009 saw a total of 625 deals valued at USD107.1bn, a decrease of 64 per cent by value and 60 per cent by volume from Q1 2008.
European activity by target company makes up 26 per cent of global M&A activity by value and 38 per cent by number of deals announced so far this year. This compares to 43 per cent for 2008.
mergermarket says the lack of mega deals in Europe has meant that the total deal value for the first quarter has fallen to lows last seen in Q4 2001.
The Germanic region is currently the most active region by volume, accounting for 21 per cent of European M&A, displacing the UK & Ireland which now account for 19 per cent, down from 24 per cent in 2008.
In the Americas, deal volume has been evenly spread across all sectors in the first quarter, but has suffered a drop of about 23 per cent from what was already a slow quarter at the end of 2008. Compared to the same period last year, activity has dropped by a dramatic 53 per cent.
Despite the handful of mega pharma deals in Q1 2009, activity in sectors outside of life sciences and healthcare has slowed down considerably, and is showing no signs of turnaround just yet.
Meanwhile, Q1 2009 has seen the announcement of 370 M&A transactions valued at USD59.5bn in the Asia-Pacific. Deal flow has dramatically decreased by 44 per cent compared to Q1 2008, though this fares better than Europe and North America, while overall deal values have fallen by 34 per cent. Value and volume figures have decreased by 41 per cent and 23 per cent respectively when compared to the previous quarter.
The Asia-Pacific region made up 23 per cent of global M&A activity and contributed just 15 per cent of total deal values. The region has, however, seen the most deals above the USD600m mark so far this year – 22 transactions compared to 18 in North America.
Japan has overtaken China this quarter as the most active country in the Asia-Pacific region for the first time since Q1 2004. Japanese M&A accounts for 28 per cent of the number of Asia-Pacific deals, while Chinese activity makes up 25 per cent.
The report says recent Japanese M&A has been increasingly driven by firms increasing their stakes in partial subsidiaries in order to address the issue of influence and control for listed majority owned subsidiaries.
