M&A Deal Volumes: It’s not Armageddon, Part 2
At the half year point, I noted that although deal volumes were lower, the world had not ended for M&A deals in 2008 (see here). Reading the papers, one would have thought that no deals were being done — and certainly the hype of the market was gone, with the front pages of the Financial Times and the Wall Street Journal usually being taken up with stories other than large M&A deals.
Another interesting note in the news today, in Financial News online today: With the inclusion of the €9.8 billion Commerzbank acquisition of Dresdner, the volume of deals as of earlier this week hit the $2.5 trillion mark — which, if no other deals materialised for the next four months, would make it the seventh strongest M&A year ever. But that story in the Financial News said that this milestone was reached two months later this year than last year. That’s not a bad news story for M&A, as I read it as a good news story that the market remains so strong.
Of course, there are bright spots and dark corners of the current market. Despite the Commerzbank / Dresdner deal, the financial services industry has seen the greatest fall in deal volume (42%). Mining and consumer products are the only two industries that are so far showing more deals this year.
Also of note: strategic deals are down only 16%, and the disappearance of many venture capital, private equity and hedge funds from the market has caused the financial deals to fall 63%. Overall, the M&A deal market is 27% lower.
If we annualise the current volume, we’ll see the 2008 market at $3.75 billion, which will make it either the third or fourth best year ever. Not Armageddon.
Intelligent Mergers 
The current crises and tremendous volatility of different markets across the whole world does not necessary have to push away investors and companies from M&A’s. As Warren Buffet said, what is a bad situation of a market for some investors is a good for others. In other words through the M&A it’s possible to purchase partially or fully companies, which were undervalued by a market. After the wave of the credit crunch would calm down, we might be facing a major global monopoly, because only the biggest and strongest would survive, which would be an Armageddon.
Dimitry S.
Friday, 14 November 2008