Mega-merger fever returns in third quarter

Free from the volatility that plagued the public markets in the second quarter of 2000, blockbuster public deals staged a comeback of sorts in the third quarter of 2000.

There were 61 mega-deals deals with price tags of $1 billion or more recorded during the quarter, up from a disappointing 45 such transactions in the second quarter, according to Mergerstat LP, a company that tracks mergers and acquisitions involving U.S. business entities.

Mega-deal values also saw a healthy rise in the third quarter.

Deal makers posted $328.6 billion in value for the period, easily surpassing the lackluster $168.7 billion performance during the second quarter.

Leading the list of deals in the third quarter were: Deutsche Telekom's $41.6 billion agreement to buy mobile-phone operator VoiceStream Wireless; JDS Uniphase's $38.1 billion agreement to purchase SDL, a maker of laser equipment for dense wavelength multiplexing; Chase Manhattan's $36.5 billion deal to buy global banking powerhouse J.P. Morgan; Citigroup's $30.8 billion agreement to acquire Associates First Capital Corp., the largest consumer finance company in the United States; and Viacom's $15.6 billion agreement to purchase the 35.7 percent that it didn't already own of radio giant Infinity Broadcasting Corp.

Mergerstat also reported that the total disclosed deal value for U.S.-foreign transactions, as well as transactions involving U.S.-based companies, rose to $405.1 billion in the third quarter, well ahead of the $258.5 billion reported in the second quarter.

Acquisitions of private companies by public companies disclosed total deal values of $38.6 billion, nosing out the second quarter's $37.9 billion, while public company transactions disclosed deal values of $287.3 billion, well ahead of the second quarter's $134.8 billion.

Overall deal activity for U.S.-foreign and U.S.-only transactions slowed by 9.2 percent to a total of 2,183 transactions in the third quarter. In fact, Mergerstat stated, it was the lowest quarterly total since the first quarter of 1999.

Transactions involving private sellers and public buyers were down about 8 percent, dropping to 1,258 private transactions, while public transactions jumped 22 percent to 185 transactions. Divestitures were up 7 percent to 524 transactions.

Deal makers recorded 608 U.S.-foreign transactions in the third quarter with a total disclosed deal value of about $164.4 billion.

In the second quarter, 650 U.S.-foreign deals were posted with a total disclosed deal value of $107.5 billion.

For the period, there were 322 foreign buyers of U.S. companies disclosing $125.5 billion in value, compared to 294 foreign buyers of U.S. companies disclosing $74.9 billion in value in the second quarter.

There were 286 U.S. buyers of foreign companies disclosing $38.9 billion in value in the third quarter, compared to 356 U.S. buyers of foreign companies disclosing $32.6 billion in value in the second quarter.

The leading target industries in the third quarter in terms of deal activity were computer software supplies and services at 588 announced transactions, miscellaneous services (209), brokerage, investments and management consulting (139), communications (98), and wholesale and distribution (89).

The leading target industries in terms of disclosed dollar value were banking and finance, with an aggregate dollar value of $72.6 billion, communications ($58 billion), electronics ($51 billion), computer software, supplies and services ($40.3 billion), and brokerage, investment and management consulting ($30.3 billion).

The leading target sectors in the third quarter in terms of activity were prepackaged software at 237 announced transactions, information retrieval services (178), management consulting services (70), computer integrated systems design (64), and computer programming services (55).

The leading target sectors in terms of disclosed dollar value were semiconductors and related devices with an aggregate value of $49.5 billion, radiotelephone communications, which includes manufacturers of cellular telephones and pagers ($49.2 billion), state commercial banks ($38 billion), mortgage bankers and loan correspondents ($30.9 billion), and prepackaged software ($23.4 billion).

The biggest buyers in terms of activity in the third quarter were General Electric Co., which acquired 10 companies, BB&T Corp. (nine companies), AT&T Corp., Black Box Corp., Cisco Systems, Quanta Services (eight companies), SPX Corp. (seven companies), and Clear Channel Communications, Simione Scilla Larrow & Dowling (six companies).

The leading financial advisers for the third quarter were Goldman Sachs & Co., advising on transactions totaling $271 billion in value, Salomon Smith Barney ($134.8 billion), Morgan Stanley Dean Witter ($112.3 billion), Merrill Lynch & Co. ($110.3 billion), and Chase Manhattan Corp. ($99.2 billion).