Mergers, acquisitions drop 16.4 percent in 2001

Only Ebenezer Scrooge could have loved a year like this, ac-cording to a Jan. 2 release from Mergerstat LP.

U.S. mergers and acquisitions fell 16.4 percent from last year's pace to 8,224 transactions, the largest percentage year-over-year drop in volume since 1987. Total disclosed deal value fell to $702.8 billion from $1.33 trillion in 2000.

The total number of deals worth $1 billion or more dropped to 118, or 76 percent, in 2001. Disclosed values on those deals declined to $472.6 billion from $1.05 trillion in 2000.

Contributing to the decline in mega-deal value were some high-profile cancellations in 2001: UAL's $4 billion deal for US Airways Group; Dynegy's $7.3 billion agreement to buy Enron; GE's $44.2 billion agreement to acquire Honey-well; and potentially Hewlett-Packard's $25.7 billion agreement to purchase Compaq Computer.

On the other hand, there were big deals to be found in 2001. Mergerstat's top five transactions of the year were Com-cast's $44 billion deal to buy AT&T Broadband & Internet Services; EchoStar Communi-cations' $29.7 billion deal to acquire Hughes Electronics from GM; American Interna-tional Group's $23 billion plan to combine with American General; Phillips Petroleum's $15.2 billion agreement to acquire Conoco; and First Un-ion's $13.4 billion deal to buy Wachovia.

And U.S. industries were not completely stalled in 2001, though only 18 of the 49 industries tracked by Mergerstat showed an increase in year-over-year deal activity.

Mergerstat's top five performers were the insurance industry, which posted 64 more transactions than in 2000, followed by the health services (+42 transactions), real estate (+40), oil and gas (+28), and energy services (+19) industries.

Meanwhile, the computer software, supplies and services industry led the industries with the largest declines in year-over-year deal activity, recording 833 fewer transactions than 2000.

Second on the list was the communications industry, with 140 fewer transactions than last year, followed by the construction contractors and engineering services (-93), electronics (-79), and electrical equipment (-75) industries.

Mergerstat stated that the tight-fisted nature of the market today has a lot of dealmakers looking to the spring of 2002, hoping that a predicted recovery in the U.S. economy will jump-start lender confidence and get the deals flowing again.

Yet even if that happens, a return to the heady days of 2000 appears improbable, Mergerstat stated.

Other highlights of the year, according to Mergerstat:

Cross-border transactions slowed in 2001, especially among European buyers of U.S. companies.

Even in the rough market of 2001, some companies still managed to go on buying binges.

The top five buyers of the year were: General Electric (49 deals announcements), Brown & Brown (26), Tyco International (19), Gallagher & Co (17), Black Box (15), CRH (15), and Divine (15).

There were 4,833 deals for private companies and 727 deals for public companies in 2001.

Cash was the most popular method of payment for transactions in 2001, accounting for about 45.7 percent of 3,071 transactions where deal value was disclosed. Stock payments accounted for about 27.9 percent and a combination of stock and cash payments accounted for 24.9 percent. (Debt and warrants and options accounted for the remaining small percentage.)

Mergerstat LP is a leading provider of merger and acquisition information to the U.S. and European markets.