First Quarter M&A Deal Volumes 2009 — Good sign?

Posted on Monday, 6 April 2009. Filed under: Commentary, Mergers |

Can we see the light at the end of the tunnel?  I think I can.

The deal volumes for the first quarter were not bad.  Not great, but the fact that they weren’t bad is a good sign.  Just as in the housing market, when the declines end, that’s taken to be the start of the new bull market.  Of course, it’s too early to predict an upturn in the market (whether M&A — on which I am happy to offer an opinion — or the real estate market — about which I would not opine).  But there’s hope where none existed before.

Why am I confident in saying this, and having it posted here for posterity?  It isn’t just the deal volume of the first quarter (nicely reported in the Financial Times here on 29 March 2009) at $525 billion with the FT headline ‘M&A starts year with 36% fall’.  Yes, this was down over a third from the already-depressed levels of Q1 2008.  But if this ‘depressed’ level continues for the year (that is, if you annualise the first quarter), then you get a total year level of $2.1 trillion.  A respectable level that still would put 2009 in the top 10 years of M&A ever, and well above the 2002 trough of $1.2 trillion.  Now THAT was a depressed level.

This does bear noting.  Peak (1999) to trough (2002) in the last merger wave was down 72%.  If 2009 really is the trough following the last peak (2007), then the decline is ‘just’ 55%.  Not, as I’ve written last year, Armageddon.  Not pleasant for the market, but there are other financial markets that have been hit much worse.

In the past several weeks, I’ve been speaking to a lot of practitioners in the M&A markets here in Europe.  They have longer and larger backlogs than several months ago.  They are beginning to think about hiring, and some actually are selectively adding to their teams (usually when they can get someone from one of the larger M&A firms who are struggling because of reasons other than their M&A deal volumes).  No one has been talking about another round of redundancies or a reduced backlog of deals.  Now…THAT’s encouraging. 

And other analysts are seeing the same thing.  Regent, a boutique technology M&A advisor here in Europe, wrote a report that shows in their sector that the ‘nadir’ was in November last year.   

Anyone else seeing the light at the end of the tunnel?

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