It’s not Armageddon: M&A Deal Volumes in the First Half 2008

Posted on Tuesday, 1 July 2008. Filed under: Business History, Commentary, Mergers |

Reading the papers and listening to the news, you would think the bottom’s dropped out of the M&A market in the first half of 2008.  Just last week, the headline in the Financial Times on 27 June 2008 was ‘Value of M&A falls sharply as buy-out boom ends’. 

A closer read of the stories yields another answer.  Granted, the value of M&A deals in the first half is down nearly a third compared to the first half of last year:  $1.86 trillion, according to Dealogic.  But if you annualise this figure, you will find that the volume of over $3.7 trillion would make 2008 the third or fourth largest year ever — and larger than 2006 that many people at the time thought would be the peak of the current merger wave.

M&A Deal Volumes

There are some significant changes, although some things (such as Goldman Sachs topping the list of advisors) never seem to change.  Deutsche Bank and Morgan Stanley appear to have fared most poorly.  And overall, at least in Europe, investment banking fees are down commensurate with the market (35% in the first half, according to the Wall Street Journal).  Private equity / venture capital deals are 78% lower and represent just 6% of the global M&A market, according to the FT.  Their deals, of course, drove the market up in this last most recent merger wave in the mid-2000′s.  Asia is holding up the volumes in 2008, by-the-way. 

What will the second half bring?  We do need to see some continuing announcements of blockbuster deals, but if there are a few (and I understand there are some in the works), then 2008 won’t look as bad as predicted by the Cassandras of the press and other industry pundits.  I do hope I’m right and they’re wrong!

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4 Responses to “It’s not Armageddon: M&A Deal Volumes in the First Half 2008”

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I do hope they are wrong as well. I think we’d see a lot more M&A deals than the pessimists think. Granted everything is in a bad shape right now, in terms of the economy etc, i also think that it would be a good time a lot of companies would move to acquire their rivals who are not doing well. Although, a lot of cash right now is ‘conservation capital’. And Goldman still being on top? Expectedly, i would think, looking at how well they have weathered the storm..

Additional possible answres:Pros: Spread our product to more business lines (Med-Low business) too and increase revenues Future possible expansion to other business (trucks and machinery displays and other ones) based on more brand image Cost synergies (maybe the competitor’s factories are cheaper in Asia, distribution channel to both new business lines, warehouses for med-low business are requested to be larger )Cons: Maybe the customer could enter by its own in the med-low market without sharing profits. Brand image damaged

I am doing a research on M&A and your figure is very interesting. Would you mind sharing its source so that I could reference it on my work? Thank you in advance. Best regards, Paulo.

The data comes principally from Thomson Financial, although early data was sourced from Sanford Bernstein.


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