Merger, acquisition activity slumps dramatically

According to the latest information from Mergerstat LP, it's hard to imagine what could possibly shock the financial community these days.

The latest bad news

Twelve months ago, it would have been sensational to report that dealmakers had announced just 1,699 U.S. and U.S. cross-border transactions for the quarter, the lowest level of overall mergers and acquisitions activity in almost five years.

But today it will simply be bad news in a year of bad news for the U.S. markets, which have suffered everything from dot.com implosions to the tragic World Trade Center explosions.

Certainly, it will come as no surprise to learn that the merger-and-acquisition market may not surpass 8,000 transactions for the year after recording 9,278 transactions in 1999 and 9,566 transactions in 2000.

Twelve months ago, merger-and-acquisition observers would have fretted about a quarter in which dealmakers posted just $225.7 billion in announced deal value.

They would have been especially nervous to learn that if two unsolicited bids were subtracted from the equation Comcast's $44 billion offer to buy AT&T Broadband & Internet Services and EchoStar Communication Corp.'s $29.7 billion proposal to buy Hughes Electronics Corp. from General Motors the aggregate deal value would fall to $152 billion.

But in today's somber market environment, that modest total has become an unexpected bright spot, outshining the $187.5 billion total for the first quarter and the $181 billion for the second quarter of 2001.

Nevertheless, it will come as no surprise to learn that, with or without the Comcast and EchoStar proposals, the total aggregate deal value for the year will sink to its lowest level since 1997.

Disappearing deals

Twelve months ago, the top financial and legal advisors were racking up record fees as they advised on one mega-deal (i.e., transactions valued at $1 billion or more) after another. In the third quarter of 2000, dealmakers reported a record-breaking 61 transactions disclosing a total deal value of $320.2 billion.

Today, the blockbuster deals have dried up by almost 50 percent. For the third quarter 2001, dealmakers reported just 32 mega-deal transactions disclosing $175.8 billion.

Twelve months ago, nobody would have predicted an across-the-board slowdown in activity in 38 of the 49 industries tracked by Mergerstat.

But today, the only industries that reported gains over the third quarter of 2000 were real estate (+11 transactions), office equipment and computer hardware (+8), toys and recreational products (+4), household goods (+2), mining and minerals (+2), construction mining and oil equipment and machinery (+1), and energy services (+1).

The industries that reported the biggest slowdowns were computer software, supplies and services (-315 transactions), printing and publishing (-53), brokerage, investment and management consulting (-44), communications (-39), and wholesale and distribution (-28).

Twelve months ago, the top seller states in the country for the third quarter were California (359 transactions), New York (176), Texas (171), Florida (105), Massachusetts (91), and Illinois (89). Today, the top seller states for the third quarter aren't any different, but the impact of the merger-and-acquisition slowdown in these key geographic areas is clearly evident: California (233 transactions), New York (118), Texas (109), Florida (64), and Massachusetts (52) and Illinois (52).

Merger & acquisition highlights

Dealmakers announced 1,699 transactions in the third quarter of 2001, or about 34.8 percent fewer transactions than the third quarter of 2000 and about 18.4 percent fewer transactions than the second quarter of 2001.

Dealmakers disclosed $225.7 billion in aggregate deal value in the third quarter of 2001, compared to $397.5 billion in the third quarter of 2000 and $181 billion in the second quarter of 2001.

Dealmakers reported 32 mega-deals (i.e., transactions of $1 billion or more) with a disclosed deal value of $175.8 billion in the third quarter, compared to 61 mega-deals disclosing $320.2 billion in the third quarter of 2000 and 33 mega-deals disclosing $98.7 billion in the second quarter of 2001.

Deal activity for 38 of the 49 industries tracked by Mergerstat slowed relative to the third quarter of 2000. Deal activity for 33 of the 49 industries tracked by Mergerstat slowed relative to the second quarter of 2001.

The top seller states saw a marked decrease in activity in the third quarter of 2001, relative to the third quarter of 2000.

Additional merger-and-acquisition information, including current and historical merger-and-acquisition activity and deal value, is available on Mergerstat's Web site at www.mergerstat.com.

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