Cross-border transactions dominate in M|amp|A activity

Overall activity for U.S. and U.S. cross-border transactions rebounded in the first quarter of 2001, according to a news release from Mergerstat LP.

This reverses the downward trend that began last year after the first quarter's record-breaking run of 2,637 transactions. Dealmakers couldn't match that feverish pace again, but the quarter's total of 2,206 transactions was enough to surpass the 2,137 transactions recorded in the fourth quarter of last year.

Cross-border activity continued to make up a larger percentage of overall activity as dealmakers reported a new high of 675 transactions in the first quarter of 2001.

Foreign buyers of U.S. companies posted a record 335 transactions, easily surpassing the 228 acquisitions of the fourth quarter and the 302 transactions of the first quarter 2000.

Meanwhile, U.S. buyers bought 340 companies outside of their borders, topping the 233 reported in the fourth quarter of 2000, but falling just short of the 353 acquisitions announced in the first quarter.

While merger and acquisition activity for the first quarter of 2001 was up over the fourth quarter of last year, it appears that the trend may not extend to the second quarter of 2001. Monthly activity for the first quarter showed a steady decline.

Dealmakers reported 683 transactions in March, down from 740 in February and 783 in January 2001. The merger and acquisition market also reported declines in some of the market's most active industries during the quarter.

The drugs, medical supplies and equipment industry (56 transactions, compared to 88 in 4Q00) recorded the largest drop in announced deals in the first quarter of 2001, followed by the computer software, supplies and services industry (509, compared to 524), the electronics industry (47, compared to 61), the retail industry (84, compared to 97), and the banking and finance industry (63, compared to 72).

What's more, deal value for U.S. and U.S. cross-border transactions fell to its lowest level since the first quarter of 1998. Dealmakers disclosed just $188.3 billion during the first three months of 2001, compared to $267.3 billion in the fourth quarter of 2000 and $339.2 billion in the first quarter of 2000.

Megadeals, or transactions valued at $1.0 billion or more, fell to $119.6 billion, compared to $198.8 billion in the fourth quarter of 2000 and $357.4 billion in the first quarter of last year.

Yet despite the overall drop in transaction values, dealmakers managed to sign several blockbuster agreements during the quarter. The U.K.'s Prudential PLC signed a $24.3 billion agreement to buy American General Corp; Johnson & Johnson struck a $12.3 billion agreement to acquire ALZA Corp; Switzerland-based Nestle SA agreed to acquire Ralston Purina Co for $10.5 million; Tyco International Ltd. agreed to purchase The CIT Group Inc. for $9.2 billion; and Phillips Petroleum Co. signed a $6.7 billion agreement to acquire Tosco Corp.

Mergerstat LP tracks mergers and acquisitions involving U.S. business entities, excluding the exchange of business assets, private placements, spin-offs and open-market transactions.